Our view: Q4/23 results were slightly better than expected with the 2024 program positioned for an operational focus and minimal acquisitions, though we wouldn't be surprised to see the company look to prune select non-core assets (Flat Lake, Battrum, etc) if the price was right. Reiterate OP, with the road map to a higher valuation (in our view) featuring drama-free execution through 2024 and proving out new Montney lands.
Key points:
Q4 results - above street. CPG reported Q4/23 production of 162,269 boe/ d (RBC: 160,434 boe/d; Street: 160,144 boe/d) driving AFFO (f.d.) of $1.03 (RBC/ Street: $0.99/0.96). Capital expenditures came in at $239mm (RBC/ Street: $240mm/$218mm).
Reserves up on acquisitions. CPG's 2P reserve book increased by 68% to 1,201 mmboe (2022: 713 mmboe), with liquids weighting decreasing to 64% (2022: 82%) driven by acquisitions in 2023. 1P reserves increased by 59%, mapping to 768 mmboe (2022: 482 mmboe), and PDP reserves increased by 26% to 381 mmboe. The company’s reserve life index now sits at roughly 16 years on a 2P basis (based on 2024 guidance). CPG's 2P recycle ratio came in at 2.5x in 2023, based on a field netback of $43.71/ boe while 2P reserves were added at an FD&A cost of $17.70/boe (2022: 27.56/boe). PDP FD&A mapped to $37.54/boe.
Return of capital - returning 60% of FCF. In line with prior guidance, CPG increased its base dividend by 15% to $0.115/sh and anticipates returning 60% of its FCF to shareholders in 2024 via base dividends, shares repurchases and special dividends (continued preference toward share repurchases). In 2023, CPG repurchased 34.6mm shares for a total shareholder return of $600mm (including dividends).
2024 guidance - unchanged. CPG has left 2024 guidance unchanged at 202 mboe/d (midpoint) on $1,490mm (midpoint) of capital with 45% of its budget allocated to the Alberta Montney, 35% toward the Kaybob Duvernay and 20% to Saskatchewan while returning 60% of its FCF.
Operations update - focus on proving out acquired lands. (1) At Alberta Montney, CPG has 3 rigs across the play while drilling its first pad on HHRS lands in Q1/24 and expected to be brought on-stream in H2/24; (2) at Kaybob, CPG is currently running a 2 rig program; (3) in SE Sask, the company drilled nine 8-leg OHML wells with the most recent achieving an IP30 of >300 bbl/d (100% liquids); 7 such wells will be drilled this year. The company's newest Montney lands and recent results are mapped on Exhibit 2 of this report.