News.September 5, 2018
CALGARY, Alberta, Sept. 05, 2018 (GLOBE NEWSWIRE) -- Crescent Point Energy
Corp. ("Crescent Point" or the "Company") (TSX and NYSE: CPG) and the Board of
Directors (the Board) are pleased to announce the appointment of Craig
Bryksa as President and Chief Executive Officer (CEO), the adoption of a
new clearly defined transition plan with measurable deliverables, the
Companys preliminary 2019 guidance and the appointment of
Robert (Bob) Heinemann as the new Chairman of the Board. Our Board looks forward to working alongside Craig and his team as the
company executes its transition plan and strategy, said Barbara Munroe,
Chair of the Governance and Nominating Committee. After conducting a formal
review, which considered internal and external candidates, Craig stood as the
best-suited individual based on his demonstrated leadership and prior
experience with Crescent Points asset base.
TRANSITION PLAN KEY HIGHLIGHTS
-- Focusing the Companys asset base by pursuing significant upstream asset divestitures. -- Targeting a net debt reduction of over $1.0 billion by year end 2019, at current strip commodity prices, through a disciplined return-focused budget and asset dispositions. -- Identified certain midstream assets for potential monetization. -- Reduced workforce, resulting in an annual total expense savings of over $50 million. Our transition plan is designed to ensure we become a more focused and
efficient company with a stronger balance sheet, said Mr.Bryksa. After
taking a refreshed approach in reviewing our business, we will look to refocus
our asset base into fewer operating areas, follow a more disciplined capital
allocation process and reduce our costs. We believe this new approach will
enhance our companys sustainability and returns for shareholders.
CONCLUSIONS FROM REVIEW PROCESS
Crescent Point undertook a comprehensive review of its asset base, business
strategy and organizational structure. The Companys objective in conducting
the review was to identify measures to prioritize Crescent Points strategy
based on key value drivers, which include balance sheet improvement,
disciplined capital allocation and cost reductions.
This review process confirmed the following strengths within the Company:
-- A suite of assets with high returns, scalability and the ability to
increase free cash flow generation.
-- Multiple high-quality assets of smaller scale that could be divested to
enhance shareholder returns.
-- A strong technical and operations team with a proven track record and
waterflood expertise.
Crescent Point also identified several opportunities for improvement,
including the following, which will be focal points over the next 12 to 24
months:
-- Focusing the Companys asset base, resulting in a stronger balance sheet
and debt-adjusted per share metrics.
-- Enhancing Crescent Points business model sustainability through
increased free cash flow generation.
-- Improving the Companys cost structure and capital allocation process by
emphasizing risk-adjusted returns and efficiencies.
FOCUSED ASSET BASE AND BALANCE SHEET STRENGTH
Crescent Point expects to optimize its capital allocation process and overall
efficiencies by focusing its asset base. This approach is also expected to
provide the Company with opportunities to execute strategic dispositions to
further strengthen its financial position. Crescent Point considered a number
of value enhancing options as part of its streamlining process, ranging from
asset divestitures to more complex scenarios. The Company currently believes a
straightforward plan is the best approach to executing its transition.
To focus its asset base, the Company considered a number of key criteria,
including returns, scalability, free cash flow potential and the ability to
improve commodity market access. Based on these factors, Crescent Point has
identified the Viewfield, Shaunavon and Flat Lake resource plays as key focus
areas. The Company also plans to continue advancing its emerging and earlier
stage resource plays in the Uinta Basin and East Shale Duvernay in a paced and
disciplined manner, which could provide significant opportunity over the
long-term and garner increased capital over time. These areas, including its
emerging and earlier stage resource plays, accounted for approximately 70
percent of Crescent Points second quarter 2018 production. The Companys
remaining assets account for approximately 50,000 boe/d of its current
production.
Crescent Point is also reviewing the sale of certain infrastructure assets.
The Company believes such a transaction could unlock value, provide a near-term
source of proceeds for net debt reduction and create a strategic partnership.
Such a purchaser could also potentially fund key future infrastructure
projects, further increasing Crescent Points financial flexibility, market
access and overall returns.
With asset sales being partially dependent on prevailing market conditions,
the Company plans to be flexible in its divestitures program.
Crescent Point is targeting a net debt reduction of more than $1.0 billion by
year end 2019 at current strip commodity prices. The Companys debt reduction
strategies include maximizing free cash flow through an efficient capital
allocation process, cost reductions and disciplined asset sales. As at June 30,
2018, Crescent Point had a net debt to funds flow from operations of over 2.0
times and cash and unutilized credit capacity of approximately $1.5 billion,
with no material near-term debt maturities.
The Company is targeting a net debt to funds flow from operations below
1.3times in a commodity price environment of US$65/bbl WTI. Although this
leverage target will vary based on commodity prices, Crescent Points
long-term goal is to maintain a strong financial position, protect against
price volatility and generate strong debt-adjusted per share metrics for
shareholders.
ENHANCED FREE CASH FLOW GENERATION AND CAPITAL ALLOCATION PROCESS
Consistent with its focus on free cash flow generation, versus simple volume
growth, the Company expects to internally fund its development programs and
further strengthen its balance sheet.
Crescent Point expects to increase free cash flow generation through a
combination of initiatives, including an improved cost structure, a more
disciplined capital allocation process and advancing decline rate mitigation
techniques, such as waterflood. The Company will manage its capital allocation
process in the context of each investment, including its waterflood programs,
competing for capital based on risk-adjusted returns and long-term development
goals.
Once Crescent Point achieves its target debt levels, it will be in a better
position to allocate free cash flow to other opportunities that drive value,
such as additional debt-adjusted return-based growth, a return of capital to
shareholders via options such as dividends and potential share repurchases or a
combination thereof.
ORGANIZATIONAL RESTRUCTURING AND IMPROVED COST STRUCTURE
As part of the Companys cost reduction initiatives, Crescent Point is
finalizing an organizational restructuring that includes an immediate workforce
reduction of approximately 17 percent of employees. The Company expects this
realignment to provide annual savings of over $50 million through reductions in
both operating and general and administrative expenses. These savings partly
reflect the recent restructuring of the executive team, which is also expected
to result in approximately 20 percent lower annual compensation for current
named executive officers in 2018 compared to 2017.
I want to thank all of our staff for their hard work and contributions
over the years, said Mr. Bryksa. This restructuring is difficult, however
we needed to adjust the organization to match our current business needs. We
are all focused on executing our transition plan and are excited about Crescent
Points future.
The Companys transition plan also includes an ongoing review of its
operating and capital costs, including the implementation of field automation
to further increase efficiencies.
2018 AND PRELIMINARY 2019 GUIDANCE
Crescent Points 2018 guidance remains unchanged, with an annual average production of 177,000 boe/d and $1.775 billion of capital expenditures. This guidance implies second half 2018 capital spending of approximately $750 million and production averaging approximately 174,000 boe/d, reflecting previously announced dispositions that closed toward the end of second quarter 2018. The Company expects its 2019 capital expenditures to be approximately $1.55 billion to $1.60 billion, at current strip commodity prices, with annual average production of approximately 176,000 to 180,000 boe/d. This initial
production range reflects various capital allocation scenarios and does not
account for potential dispositions during the second half of 2018. Crescent
Point intends to finalize its 2019 guidance upon the completion of its 2018
capital program. The Companys capital expenditures budget excludes capital
expenditures on land, which are less predictable and partly dependent on land
sale outcomes. Land expenditures in 2019 are expected to be modest at
approximately one to two percent of incremental capital. Crescent Points
cash flow sensitivity in 2019, inclusive of current hedging, is approximately
$45 million for every US$1/bbl change in WTI.
The Companys near-term spending plan reflects its disciplined capital
allocation process aimed at delivering risk-adjusted returns, consistent
activity levels and projects that create long-term value. Under strip commodity
pricing, Crescent Point expects its funds flow from operations to exceed
capital expenditures and dividends in 2019, with free cash flow directed toward
debt reduction. With a reduced near-term spending outlook, compared to previous
projections, the Company is placing greater emphasis on returns versus growth
during its 12 to 24 month transition. Following that period, Crescent Point
expects its organic growth rate to increase in priority, including strong
debt-adjusted metrics, as a product of a more focused and efficient production
base.
TRANSITION PLAN DELIVERABLES
The Company has established the following transition plan deliverables, which
are expected to be achieved over the next 12 to 24 months:
-- Reducing the number of areas in which the Company operates, thereby
further enhancing efficiencies.
-- Reducing its net debt to funds flow from operations to below 1.3 times,
based on US$65/bbl WTI.
-- Increasing Crescent Points funds flow from operations netback through
improvements to its cost and capital structure by greater than sixpercent at
US$65/bbl WTI, from approximately $32.25/boe prior to this transition.
-- Increasing free cash flow generation through improved capital
efficiencies, cost reductions, the application of decline rate mitigation
techniques and following a disciplined capital allocation process.
We have completed our strategy review and established a plan to create
value for shareholders, said Mr. Bryksa. Although this transition will
take time, we expect to deliver ongoing improvement to the companys
financial position, profitability and sustainability. I am excited about the
near-term opportunities we have identified and building on these successes into
the future.
EXECUTIVE AND BOARD SUCCESSION PROCESS
As part of Crescent Points ongoing Board renewal process, Peter Bannister
has stepped down as Chairman of the Board, with Mr.Heinemann assuming the
role. Mr.Heinemann has served the Board since 2014 and possesses more than 30
years of executive oil and gas experience and leadership, including acting as a
director on various company boards as well as his prior position as President
and CEO of Berry Petroleum Co. from 2004 to 2013.
Crescent Point and its Board thank Mr. Bannister for his strong commitment
and passion, said Mr. Heinemann. His leadership helped shape the company
and establish it as one of Canadas largest light oil producers. This
standing is a significant accomplishment by all those who have been part of
Crescent Points development over the years.
The appointment of the Companys Chairman of the Board and CEO follow
Crescent Points previously disclosed governance review that commenced in
late 2017 and includes Board and executive succession planning as integral
components. Mr. Bannister and, as previously announced, Gerald Romanzin, will
each be retiring from the Board at the Companys 2019 annual general meeting
(AGM). Following the Companys 2019 AGM, Crescent Points Board will
have undergone a complete renewal since inception.
It has been a pleasure to serve on Crescent Points Board since 2003,
said Mr. Bannister. I give my full endorsement to Craig, his new executive
team and Bob as Chairman. I am confident in their abilities and that their
refreshed approach and plan will drive increased shareholder value going
forward.
CONFERENCE CALL DETAILS The Companys management will host a conference call on Wednesday,
September 5, 2018 at 7:00 a.m. MT (9:00 a.m. ET), to discuss its strategy and
outlook. A slide deck will accompany the conference call and can be found on
Crescent Points website under the Invest heading.
Participants can listen to this event online by entering
https://edge.media-server.com/m6/p/f97nda64 in a web browser. Alternately, the
conference can be accessed by dialing 844-231-0101 or 216-562-0389 and entering
the following passcode: 8629178. For those unable to participate in the
conference call at the scheduled time, the webcast will be archived for replay
and can be accessed on the Company's website at
www.crescentpointenergy.com .
The replay will be available approximately one hour following completion of the
call.
Non-GAAP Financial Measures
Throughout this press release, the Company uses the terms "funds flow from
operations", "net debt", "net debt to funds flow from operations", "funds flow
from operations netback" and free cash flow. These terms do not have any
standardized meaning as prescribed by IFRS and, therefore, may not be
comparable with the calculation of similar measures presented by other issuers.
Funds flow from operations is calculated based on cash flow from operating
activities before changes in non-cash working capital, transaction costs and
decommissioning expenditures.Transaction costs are excluded as they vary
based on the Company's acquisition and disposition activity, and to ensure that
this metric is more comparable between periods. Decommissioning expenditures
are excluded as the Company has a voluntary reclamation fund to fund
decommissioning costs. Management utilizes funds flow from operations as a key
measure to assess the ability of the Company to finance dividends, operating
activities, capital expenditures and debt repayments. Funds flow from
operations as presented is not intended to represent cash flow from operating
activities, net earnings or other measures of financial performance calculated
in accordance with IFRS.
Net debt is calculated as long-term debt plus accounts payable and accrued
liabilities, dividends payable and long-term compensation liability, less cash,
accounts receivable, prepaids and deposits and long-term investments, excluding
the unrealized foreign exchange on translation of US dollar long-term debt.
Management utilizes net debt as a key measure to assess the liquidity of the
Company.
Net debt to funds flow from operations is calculated as the period end net
debt divided by the sum of funds flow from operations for the trailing four
quarters. The ratio of net debt to funds flow from operations is used by
management to measure the Companys overall debt position and to measure the
strength of the Companys balance sheet. Crescent Point monitors this ratio
and uses this as a key measure in making decisions regarding financing, capital
spending and dividend levels.
Funds flow from operations netback is calculated on a per boe basis as funds
flow from operations divided by total production.
Free cash flow is calculated as funds flow from operations less capital
expenditures.
Management believes the presentation of the Non-GAAP measures above provide
useful information to investors and shareholders as the measures provide
increased transparency and the ability to better analyze performance against
prior periods on a comparable basis.
Forward-Looking Statements and Other Matters
Any "financial outlook" or "future oriented financial information" in this
press release, as defined by applicable securities legislation has been
approved by management of Crescent Point. Such financial outlook or future
oriented financial information is provided for the purpose of providing
information about managements current expectations and plans relating to the
future. Readers are cautioned that reliance on such information may not be
appropriate for other purposes.
Certain statements contained in this press release constitute
"forward-looking statements" within the meaning of section 27A of the
Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934
and "forward-looking information" for the purposes of Canadian securities
regulation (collectively, "forward-looking statements"). The Company has tried
to identify such forward-looking statements by use of such words as "could",
"should", "can", "anticipate", "expect", "believe", "will", "may", "intend",
"projected", "sustain", "continues", "strategy", "potential", "projects",
"grow", "take advantage", "estimate", "well-positioned" and other similar
expressions, but these words are not the exclusive means of identifying such
statements.
In particular, this press release contains forward-looking statements
pertaining, among other things, to the following: the Companys target for
net debt reduction at current strip prices (and strategies to do so) along with
the anticipated timetable to complete the reduction; the Companys plans to
pursue upstream asset divestitures; the potential disposition of midstream
assets (including several gas plants) and the possible impact such disposition
could have on unlocking value, providing a near-term source of proceeds to
reduce net debt and establishing strategic relationships to fund future
infrastructure projects to further enhance financial flexibility, market access
and overall returns; the expected annual operating and general and
administrative expense savings from reduced workforce; the expected impact of
the transition plan on ensuring the Company becomes more focused and efficient,
strengthening the Companys balance sheet and enhancing sustainability and
returns for shareholders; the Companys focal points over the next 12 to 24
months, including plans to focus the Companys asset base (and the impact of
doing so on the balance sheet, debt adjusted per share metrics, capital
allocation and overall efficiencies), enhance sustainability through the
generation of increased free cash flow and emphasizing risk-adjusted returns
and efficiencies (and the expected impact that will have on cost structure and
capital allocation); the expected opportunity to execute strategic dispositions
to further strengthen the Companys financial position; the options the
Company believes are available to it to enhance value; the Companys plans to
be flexible in its divestiture program; the Companys plans to continue
advancing its earlier stage resource plays and the potential significant
opportunity that could be provided by such advancement and the potential
allocation of additional capital to those plays; the Companys plans to
continue to evaluate its assets; the Companys net debt to funds flow ratio
target at US$65/bbl WTI and the anticipated impact of commodity prices on this
target; Crescent Points long term goal to maintain a strong financial
position, protect against price volatility and generate strong debt-adjusted
per share metrics for shareholders;