From RBC
March 5, 2020Crescent Point Energy Corp.Q4/19 - Rightsizing ReservesOur view: Q4/19 results were slightly ahead on cash flows with the 2020outlook reiterated (but flexible); CPG's focus remains on sustainability andreturns. The reserve book contained a number of moving parts - with56 mmboe in negative revisions reflecting a 'rightsizing' as it relates toregional curves. We remain comfortable with our neutral (SP) rating.Key points:•Q4/19 results - slightly ahead. Crescent Point reported Q4 productionof 145,191 boe/d (RBC 143,964 boe/d; Street 144,282 boe/d) whichdrove CFPS of $0.78 (RBC $0.75; Street $0.73). During the quarter thecompany invested $343 million on development, drilling 137 (135 net)wells. Margins were generally as expected, with the largest variances inopex and interest; for more details see Exhibit 2.•2020 outlook intact, for now. CPG reiterated its 2020 outlook, whichincludes capital of $1.1-1.2B driving a production volume bracket of140-144 mboe/d, down roughly 12% compared to 2019. During 2020 atthe RBC deck, we peg the company's FCF (pre-dividend) at roughly $238million; which, after covering the dividend obligation of $21 million,we expect will be split equally between debt repayment and sharebuybacks). At the futures strip, we peg CPG's FCF to be roughly neutral;however, the company would likely scale back capital expenditures inthat scenario.•Operations - sticking to the core. See Exhibit 2 for operational details;operational highlights during the quarter include (1) reduction of ARO of$220 million YoY as a result of disposition and abandonment activities;(2) 6% decline in 2019 per boe opex; and (3) growing production fromNorth Dakota driving increased NGLs weighting.•Reserves - shrink to grow. 2P reserves fell by 25%, reflective of 181mmboe of dispositions and 56 mmboe of negative technical revisions,offset by additions in core regions. Of note, curves were reviseddownward in several legacy areas (Viewfield, Flat Lake, Shaunavon)to better reflect well performance; these were the key drivers of thetechnical revision.•Leverage ratios - liquidity ample. The company's balance sheet remainsin good shape with plenty of available liquidity. 2020E net debt mapsto roughly $2.1B with a D/CF ratio of 1.5x (peers 1.9x) and 11% drawnon the company's $3.0B credit facilities (including working capital). Ofnote, the company also initiated an additional NCIB, which gives theopportunity to acquire 36.8 million shares (~7% of public float); we'vebuilt in $60 million in buybacks through 2020.•Sector Perform maintained. Our neutral stance remains unchanged,target to $6.50 on lowered estimates. CPG shares continue to trade ata discount with 2020E EV/DACF at 2.5x vs peers at 3.2x (RBC deck).Continued focus on per boe opex reduction and positive results fromasset sales would cause us to revisit our neutral stance.