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Crescent Point Energy Corp.
(CPG-T) C$10.78
Divests ND, Increasing Exposure to Montney/Duvernay
Event
Announces North Dakota Asset Sale. Updates Guidance to Reflect Disposition.
Impact: SLIGHTLY POSITIVE
As we had discussed in prior research (see What Could a ND Bakken Sale Look Like for CPG? - June 26, 2023), we believed that it was likely Crescent Point would divest its North Dakota assets. On August 24, CPG announced that they agreed to sell N.D. assets, with an expected close in Q4/23. To reflect the asset sale, the company revised FY-2023 production guidance down 4.5 mBOE/d (Exhibit 1).
CPG agreed to sell the ~23.5 mBOE/d of current N.D. Bakken production for US$500 million (~C$675 million). With company-estimated annualized CF of $375 million at US$75/bbl WTI, this equates to a CF-based sale metric of ~1.8x or a flowing barrel metric of $27,700/BOEPD.
Our View:
As we highlighted in our previous note, production on the assets has grown rapidly (now high decline) and there is minimal booked inventory remaining on the properties. For these reasons, we had anticipated: 1) the assets would ultimately be sold as it made little strategic sense to retain them within the portfolio, and 2) CF-metrics based on a single year of peak production would be low to reflect the high-decline/low-inventory nature of the property. The absolute sale metric was ~20% below what we had anticipated, but the delta relative to Crescent Point's market cap is small (<3%).
The sale sees CPG exiting a non-core, high-decline, low-inventory asset, that is currently generating virtually no TD-estimated FCF and would likely see costs rise as volumes ebbed. Exiting the property allows the company to reduce net debt to $2.1 billion at YE-2023E (from $2.8 billion), improving YE-2024E D/CF to 0.9x (from 1.0x). Finally, after the transaction closes, we estimate CPG's production to be ~50% from new scalable plays (Montney/Duvernay).
TD Investment Conclusion
Crescent Point's business model continues to evolve. It has materially de-risked its Duvernay asset since the transformative acquisition announced in Q1/21, added more scalable resource-style assets with the recent Montney acquisition and has now increased equity holder exposure to these plays through the ND Bakken disposition. We view this as another positive step in the evolution of Crescent Point's portfolio.
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