Crescent Point Energy (TSX:CPG) makes $1.7B oil and gas purchase

• Crescent Point Energy (CPG) will acquire Spartan Delta Corp.’s oil and liquids-rich Montney assets in Alberta for C$1.7 billion
• This acquisition adds 600 Montney locations in Alberta and more than 20 years of premium drilling inventory. It is immediately accretive to excess cash flow per share by 20 per cent
• The asset generates roughly 38,000 boe/d (55 per cent oil and liquids)
• Crescent Point Energy Corp. (CPG) stock is up 4.02 per cent over the last five days and opened trading at C$9.22 per share

Crescent Point Energy (CPG) will acquire Spartan Delta Corp.’s (TSX:SDE) oil and liquids-rich Montney assets in Alberta.

Crescent Point signed the all-cash deal for C$1.7 billion.

This acquisition adds 600 Montney locations in Alberta and more than 20 years of premium drilling inventory. It is immediately accretive to excess cash flow per share by 20 per cent.

The asset generates roughly 38,000 barrels of oil equivalent per day (boe/d) (55 per cent oil and liquids) with attractive netbacks generating significant excess cash flow. Its 951 sq. km. net acres of contiguous land with Montney rights in Alberta within the Gold Creek and Karr area.

“Over the past five years, we have fundamentally rebuilt and strengthened Crescent Point,” said Craig Bryksa, President, and CEO of Crescent Point. “As a result of our efforts, and after closing this transaction, our asset base will include significant inventory depth in both the Kaybob Duvernay and the Montney, while also maintaining significant low-decline assets in Saskatchewan that provide additional excess cash flow. The Montney acquisition is immediately accretive to our per share metrics, enhances our return of capital to shareholders, and is aligned with our long-term strategy to focus on high quality, scalable resource plays that meet our defined asset criteria. These assets include over 20 years of drilling locations and increase our total corporate inventory of premium locations to 15 years. The acquired lands are also situated in the volatile oil fairway with similar resource characteristics to our adjacent Kaybob Duvernay play, where we have demonstrated significant operational excellence.”

Spartan shares hit a near two-month high on this news.

Five-year outlook:

Following this update, the company revised its annual guidance for the year, incorporating the impact of the acquisition, with annual average production of 160,000 to 166,000 boe/d and development capital expenditures of $1.15 billion to $1.25 billion.

The revised 2023 capital expenditures budget incorporates $150 million of development capital expenditures associated with the newly acquired assets. Crescent Point plans to manage the Montney assets by drilling 25 wells per year, which requires approximately $250 million of annual capital expenditures.

The company’s production forecast in its five-year plan is now expected to grow to 195,000 boe/d by 2027. This forecast is expected to generate $3.6 billion to $5.2 billion of cumulative excess cash flow ($6.53 to $9.57 per share), at US$65/bbl to US$75/bbl WTI, representing a 20 per cent increase compared to its previous outlook.

Crescent Point Energy Corp. (CPG) stock is up 4.02 per cent over the last five days and opened trading at C$9.22 per share.