Veren Inc T.VRN

TD

[retiredcf]

On their Action Buy List with an $18.50 target. GLTA

Crescent Point Energy Corp.

(CPG-T) C$8.80

CPG Duvernay Teach-in High-level Takeaways

Event

Kaybob Duvernay Analyst Teach-in

Impact: SLIGHTLY POSITIVE

Crescent Point hosted an analyst teach-in that provided more granularity on its Kaybob Duvernay asset. Without rehashing the presentation, the key takeaways for us include:

• Significant Duvernay Drilling Inventory: CPG has ~13 years of identified inventory in the Duvernay at its current pace of development (40 wells/year). Although this is lower than some more gas-weighted Montney peers, it does provide significant running room and negates the need to backfill inventory in the near term, in our view.

• As we highlighted in our previous note, the company stated that the oil/NGL/gas phases are more predictable in the Duvernay at Kaybob than in AB Montney.

• Industry Continues to Improve Rates and Operational Efficiencies: Well results across the play have continually improved. Recent wells are showing oil EURs of >400 mBOE, up >200% from the start of the decade. Since CPG acquired the asset, its drilling days are down 40% (~12 days/well), while frac days are down 20% (four days/well).

• Negligible Go-forward Infrastructure Capital Required: CPG holds significant infrastructure in the region, with material spare capacity. The company estimates it requires only $200mm of incremental Kaybob infrastructure spending over the next 10 years (i.e., $20mm/year) or ~4% additional infrastructure capital above the expected DC&T cost.

• Reconciled Public vs. Actual Datasets: Public data has been limited, given the way CPG reports liquids to the AER. CPG provided a reconciliation between public data and actual results. Furthermore, the company provided short-term production curves for each pad, highlighting payback periods of 4-8 months.

• Significant NPV Potential of 5-year Plan: Based on a company-estimated NPV per well of ~$18mm ($75/bbl WTI) in the oil/NGL-rich window, we assume a five- year development program that consumes 40 well/year in the oil/NGL window, equates to an NPV of $2.9 billion ($5.17/share). This excludes the value of the current production.

• This consumes only 57% of its oil/NGL-rich Duvernay inventory and leaves 300 future locations split between oil/NGL-rich and lean gas windows. Deferring lean gas development may prove to be advantageous to align its gassier additions with potentially higher gas prices later this decade.

[Anschutz]

Good to see analyst forecasts rising. The takeaway for me is that 1. investment firms attended the event, 2. took the time to write about it, 3. appear to like what they heard.  I recall a similar event 4 or 5 years ago where CPG talked at length with lots of technical detail about waterflooding. It had zero influence on investment firms as eyes glazed over and attendees looked at their