KEYFACT Energy
Crescent Point Energy Corp. today announced its 2020 budget.
KEY HIGHLIGHTS
- Expect to generate approximately $200 million to $350 million of excess cash flow in 2020 at US$55/bbl to US$60/bbl WTI, allowing for continued net debt reduction and accretive share repurchases.
- Disciplined and returns focused budget centered in key focus areas and fully funded at less than US$50/bbl WTI.
- Annual average production guidance of 140,000 to 144,000 boe/d.
- Capital expenditures of $1.10 to $1.20 billion, primarily comprised of sustaining capital.
- Advancing field automation and implementing a new supply chain pre-qualification process as part of continued focus on environmental, social and governance ("ESG") practices.
"We successfully completed our 2019 program on budget while also significantly strengthening our balance sheet through excess cash flow generation and accretive dispositions," said Craig Bryksa, President and CEO of Crescent Point. "Our plans for 2020 will continue to focus on returns, capital discipline, cost saving initiatives and generating excess cash flow to further enhance shareholder value. We will also continue to seek opportunities to further optimize our portfolio, where appropriate, as part of our strategy to focus our asset base."
2020 PRODUCTION AND CAPITAL EXPENDITURES BUDGET
Crescent Point's 2020 capital expenditures budget of $1.10 to $1.20 billion is primarily comprised of sustaining capital and is expected to generate annual average production of 140,000 to 144,000 boe/d. This production range is unchanged from the prior year after incorporating approximately 30,000 boe/d of dispositions executed in 2019.
Over 80 percent of the 2020 capital expenditures budget is allocated to four plays including the Company's key focus areas and its North Dakota resource play. Crescent Point's key focus areas in the Viewfield, Shaunavon and Flat Lake resource plays account for approximately 60 percent of the allocation, up from approximately 55 percent in 2019. These areas currently generate strong netbacks, attractive risk-adjusted returns, excess cash flow, and the opportunity to further enhance overall sustainability through additional cost efficiencies and decline mitigation programs. The Company's North Dakota resource play also delivered strong operational performance and efficiencies in 2019, resulting in consistent capital expenditures in 2020.
Within Crescent Point's 2020 budget, approximately seven percent of its capital expenditures is prudently allocated to long-term development projects, including decline mitigation programs such as waterflood. The Company plans to convert approximately 120 producing wells to water injection wells in 2020.
EXCESS CASH FLOW, BALANCE SHEET AND SHARE REPURCHASES
Crescent Point expects to generate approximately $200 million to $350 million of excess cash flow at US$55/bbl to US$60/bbl WTI, which it plans to allocate to continued net debt reduction and accretive share repurchases. The Company's budget will be flexible in the event of lower commodity prices and is fully funded at oil prices of less than US$50/bbl WTI.
Management continues to believe a strong balance sheet is essential in a cyclical commodity business, and will remain disciplined in its capital allocation, with approximately 70 to 80 percent of its 2020 excess cash flow planned to be allocated to net debt reduction. The remaining 20 to 30 percent will be directed to share repurchases, subject to returns and market conditions, in addition to $50 million of share repurchases from expected proceeds of the recently announced infrastructure asset monetization, which is on track to close in first quarter 2020.
Since implementing its normal course issuer bid ("NCIB") in first quarter 2019, Crescent Point has repurchased, for cancellation, approximately 25.3 million shares for approximately $130 million, up to and including January, 9, 2020, representing approximately five percent of its public float. The Company intends to renew its NCIB in first quarter 2020.
As part of its risk management program to protect against commodity price volatility, Crescent Point has currently hedged approximately 50 percent of its oil and liquids production for 2020. The Company plans to continue to layer additional hedges, when appropriate, to further protect its cash flow.
Crescent Point does not have any material near-term senior note debt maturities and retains significant liquidity on its covenant-based, unsecured credit facilities which are not due for renewal until October 2023.
NETBACK IMPROVEMENT AND COST EFFICIENCIES
Crescent Point was proactive in identifying and realizing internal cost efficiencies throughout the organization in 2019, including capital costs, operating, and general and administrative expenses. The Company adopted digital technologies within its key focus areas throughout the year, which enhanced new workflow changes to realize reductions to its operating cost structure and benefits to its health and safety, and asset integrity programs.
These sustainable cost savings are in addition to benefits Crescent Point realized through dispositions executed in 2019 that further enhanced its overall netbacks and sustainability. As a result of these initiatives, the Company's expected 2020 adjusted funds flow netback has improved by approximately seven percent, including the impact of its recent infrastructure monetization, at a constant WTI price of US$55/bbl.
Crescent Point will continue to seek opportunities to further enhance its competitive position in 2020 through additional portfolio optimization, cost efficiencies and new market access opportunities.