Crescent Point CPG
Crescent Point CPG
https://www.crescentpointenergy.com/sites/default/files/news/crescent_point_completes_strategic_alberta_montney_consolidation_and_provides_2024_and_five-year_outlook_-_final.pdf
Re: Crescent Point CPG
KEY HIGHLIGHTS
Completed previously announced Alberta Montney consolidation, increasing corporate premium drilling inventory to over 20 years. < Current production is now ~200,000 Boepd
Entered into agreements to dispose of 5,000 boe/d of non-core assets for $140 million with net proceeds directed to the balance sheet.
Annual average production of 198,000 to 206,000 boe/d expected in 2024 with development capital expenditures of $1.4 to $1.5 billion. < My forecast is based on 2024 production averaging 204,000 Boepd (~48% oil, 17% NGLs and 35% natural gas)
Excess cash flow of $750 million to $950 million expected in 2024 at US$70 to US$75 WTI, with 60 percent returned to shareholders.
Plan to increase base dividend by 15 percent to $0.46 per share on an annual basis, which is expected to be declared in early 2024.
Enhanced the cumulative excess cash flow expected in five-year plan to $4.7 billion at US$70 WTI, an increase of 20 percent per share.
Achieved strong peak 30-day rates of 1,250 boe/d and 1,350 boe/d from recent pads in the Kaybob Duvernay and Alberta Montney.
2023 OPERATIONAL UPDATE
Crescent Point remains on track with its 2023 guidance which is expected to generate approximately $950 million of excess cash flow for the full year, based on average WTI price of approximately US$77.50/bbl for 2023. < All of our non-gassers in the Sweet 16 are extremely profitable if WTI flops around in the $70 to $80/bbl range.
In the Kaybob Duvernay and Alberta Montney plays, the Company continues to achieve strong operational results that are in-line or ahead of booked type well expectations. In the Kaybob Duvernay, Crescent Point's most recent multi-well pad within the volatile oil fairway came on stream during fourth quarter with an average peak 30-day rate of 1,250 boe/d per well (81% condensate, 5% NGLs). In the Alberta Montney, Crescent Point brought on stream two multi-well pads during fourth quarter in its Gold Creek area. The first pad achieved peak 30-day rates averaging 1,350 boe/d per well (72% light oil, 5% NGLs). The second pad has been on stream for less than 30 days with similar initial production rates.
NON-CORE ASSET DISPOSITIONS
During fourth quarter 2023, Crescent Point entered into agreements to dispose of its Swan Hills and Turner Valley assets in Alberta for total proceeds of approximately $140 million. The Company expects production for these assets to average approximately 5,000 boe/d (75% oil and liquids) in 2024. Crescent Point did not plan to allocate any capital expenditures to these assets in 2024. These dispositions are expected to close by early first quarter 2024, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions, with net proceeds directed toward the Company's balance sheet.
2024 GUIDANCE
Crescent Point now expects to generate annual average production of 198,000 to 206,000 boe/d (65% oil and liquids) in 2024 based on development capital expenditures of $1.4 to $1.5 billion, demonstrating an improvement in production and capital expenditures compared to the Company's preliminary guidance. Crescent Point's production guidance has changed by 2,000 boe/d compared to its preliminary guidance, despite the recently announced non-core asset dispositions of approximately 5,000 boe/d, with $50 million of less development capital expenditures expected in 2024. These improvements reflect the Company's continued operational outperformance.
Crescent Point expects this program to generate $750 million to $950 million of excess cash flow in 2024, at US$70 to US$75/bbl WTI and $2.75/Mcf AECO, and to be fully funded at approximately US$55/bbl WTI, including the planned increase to its base dividend.
The Company plans to allocate 45 percent of its 2024 budget to the Alberta Montney which is expected to generate annual average production of 97,000 boe/d (50% oil and liquids). Crescent Point plans to maintain three active drilling rigs in the Alberta Montney in 2024, drilling 60 net wells across its land base in the volatile oil fairway. The Company's operational initiatives include further enhancing its drilling and completion design and efficiently developing the recently acquired Montney assets by optimizing the number of wells drilled per section.
Crescent Point plans to allocate 35 percent of its 2024 budget to the Kaybob Duvernay, which is expected to generate annual average production of 50,000 boe/d (60% oil and liquids). The Company plans to maintain two active drilling rigs in the Kaybob Duvernay in 2024, drilling 45 net wells across its land base within the volatile oil and liquids-rich fairways, supporting production growth during the second half of the year and into 2025. This budget includes drilling longer lateral wells to improve efficiencies and further delineation of its land position, including the eastern and western portion of its land base.
Crescent Point plans to allocate the remaining 20 percent of its 2024 budget to its long-cycle, low-decline assets in Saskatchewan, which are expected to generate annual average production of 55,000 boe/d (95% oil and liquids). The budget includes the continued advancement of decline mitigation programs, including waterfloods and polymer floods, in addition to further development of open-hole multi-lateral ("OHML") wells. Crescent Point's low-decline, high netback Saskatchewan assets are expected to account for approximately 50 percent of the Company's excess cash flow in 2024.
Crescent Point's 2024 budget remains disciplined and flexible with a continued focus on allocating capital to its highest return assets with attractive payback periods. Similar to prior years, the Company will continue to allocate a portion of its capital to longer-term projects and environmental initiatives, which are expected to represent 10 percent of total expenditures, including reclamation activities.
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Bottomline: I love companies that have and clearly communicate their long-range plans. It is a sign of good leadership at the top.
CPE is currently trading at $9.18Cdn & $6.90US.
My updated valuation is $12.00US, which compares to TipRanks' price target of $11.50US.
Completed previously announced Alberta Montney consolidation, increasing corporate premium drilling inventory to over 20 years. < Current production is now ~200,000 Boepd
Entered into agreements to dispose of 5,000 boe/d of non-core assets for $140 million with net proceeds directed to the balance sheet.
Annual average production of 198,000 to 206,000 boe/d expected in 2024 with development capital expenditures of $1.4 to $1.5 billion. < My forecast is based on 2024 production averaging 204,000 Boepd (~48% oil, 17% NGLs and 35% natural gas)
Excess cash flow of $750 million to $950 million expected in 2024 at US$70 to US$75 WTI, with 60 percent returned to shareholders.
Plan to increase base dividend by 15 percent to $0.46 per share on an annual basis, which is expected to be declared in early 2024.
Enhanced the cumulative excess cash flow expected in five-year plan to $4.7 billion at US$70 WTI, an increase of 20 percent per share.
Achieved strong peak 30-day rates of 1,250 boe/d and 1,350 boe/d from recent pads in the Kaybob Duvernay and Alberta Montney.
2023 OPERATIONAL UPDATE
Crescent Point remains on track with its 2023 guidance which is expected to generate approximately $950 million of excess cash flow for the full year, based on average WTI price of approximately US$77.50/bbl for 2023. < All of our non-gassers in the Sweet 16 are extremely profitable if WTI flops around in the $70 to $80/bbl range.
In the Kaybob Duvernay and Alberta Montney plays, the Company continues to achieve strong operational results that are in-line or ahead of booked type well expectations. In the Kaybob Duvernay, Crescent Point's most recent multi-well pad within the volatile oil fairway came on stream during fourth quarter with an average peak 30-day rate of 1,250 boe/d per well (81% condensate, 5% NGLs). In the Alberta Montney, Crescent Point brought on stream two multi-well pads during fourth quarter in its Gold Creek area. The first pad achieved peak 30-day rates averaging 1,350 boe/d per well (72% light oil, 5% NGLs). The second pad has been on stream for less than 30 days with similar initial production rates.
NON-CORE ASSET DISPOSITIONS
During fourth quarter 2023, Crescent Point entered into agreements to dispose of its Swan Hills and Turner Valley assets in Alberta for total proceeds of approximately $140 million. The Company expects production for these assets to average approximately 5,000 boe/d (75% oil and liquids) in 2024. Crescent Point did not plan to allocate any capital expenditures to these assets in 2024. These dispositions are expected to close by early first quarter 2024, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions, with net proceeds directed toward the Company's balance sheet.
2024 GUIDANCE
Crescent Point now expects to generate annual average production of 198,000 to 206,000 boe/d (65% oil and liquids) in 2024 based on development capital expenditures of $1.4 to $1.5 billion, demonstrating an improvement in production and capital expenditures compared to the Company's preliminary guidance. Crescent Point's production guidance has changed by 2,000 boe/d compared to its preliminary guidance, despite the recently announced non-core asset dispositions of approximately 5,000 boe/d, with $50 million of less development capital expenditures expected in 2024. These improvements reflect the Company's continued operational outperformance.
Crescent Point expects this program to generate $750 million to $950 million of excess cash flow in 2024, at US$70 to US$75/bbl WTI and $2.75/Mcf AECO, and to be fully funded at approximately US$55/bbl WTI, including the planned increase to its base dividend.
The Company plans to allocate 45 percent of its 2024 budget to the Alberta Montney which is expected to generate annual average production of 97,000 boe/d (50% oil and liquids). Crescent Point plans to maintain three active drilling rigs in the Alberta Montney in 2024, drilling 60 net wells across its land base in the volatile oil fairway. The Company's operational initiatives include further enhancing its drilling and completion design and efficiently developing the recently acquired Montney assets by optimizing the number of wells drilled per section.
Crescent Point plans to allocate 35 percent of its 2024 budget to the Kaybob Duvernay, which is expected to generate annual average production of 50,000 boe/d (60% oil and liquids). The Company plans to maintain two active drilling rigs in the Kaybob Duvernay in 2024, drilling 45 net wells across its land base within the volatile oil and liquids-rich fairways, supporting production growth during the second half of the year and into 2025. This budget includes drilling longer lateral wells to improve efficiencies and further delineation of its land position, including the eastern and western portion of its land base.
Crescent Point plans to allocate the remaining 20 percent of its 2024 budget to its long-cycle, low-decline assets in Saskatchewan, which are expected to generate annual average production of 55,000 boe/d (95% oil and liquids). The budget includes the continued advancement of decline mitigation programs, including waterfloods and polymer floods, in addition to further development of open-hole multi-lateral ("OHML") wells. Crescent Point's low-decline, high netback Saskatchewan assets are expected to account for approximately 50 percent of the Company's excess cash flow in 2024.
Crescent Point's 2024 budget remains disciplined and flexible with a continued focus on allocating capital to its highest return assets with attractive payback periods. Similar to prior years, the Company will continue to allocate a portion of its capital to longer-term projects and environmental initiatives, which are expected to represent 10 percent of total expenditures, including reclamation activities.
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Bottomline: I love companies that have and clearly communicate their long-range plans. It is a sign of good leadership at the top.
CPE is currently trading at $9.18Cdn & $6.90US.
My updated valuation is $12.00US, which compares to TipRanks' price target of $11.50US.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Crescent Point CPG
FIVE-YEAR PLAN
Crescent Point's annual production is forecast to grow to approximately 260,000 boe/d in 2028 under its five-year plan, driven by the Company's Alberta Montney and Kaybob Duvernay assets, with cumulative after-tax excess cash flow of approximately $4.7 billion at US$70/bbl WTI and $3.35/Mcf AECO. Under this five-year plan, the Company expects to generate excess cash flow per share growth of seven percent on a compounded annual basis, or 15 percent including the benefit from expected share repurchases.
This enhanced profile highlights the strong contribution of the newly acquired Alberta Montney assets, which are expected to provide the Company with a combination of growing production and lower capital expenditure requirements to sustain production in later years. On a per share basis, Crescent Point's cumulative excess cash flow under its five-year plan has increased by approximately 20 percent as a result of the Transaction.
In 2024, the recently acquired Montney assets are expected to produce 56,000 boe/d, growing to 80,000 boe/d by 2026, then remaining flat thereafter. During this same period, development capital expenditures are expected to gradually decline from $400 million in 2024 to $300 million toward the end of the five-year plan, resulting in significant excess cash flow generation.
Crescent Point's combined Alberta Montney and Kaybob Duvernay assets are expected to represent 80 percent of the Company's total production in 2028. Crescent Point's disciplined capital allocation, in combination with its low-decline, long-cycle assets, is expected to allow the Company to also moderate its base decline rate from 30 percent in 2024 to 27 percent toward the end of its five-year plan. During this period, Crescent Point expects to reduce its reinvestment ratio, or capital expenditures as a percentage of funds flow, by nearly 10 percent.
STRATEGIC PRIORITIES AND OUTLOOK
Crescent Point's strategic priorities will focus on operational execution, strengthening its balance sheet and increasing return of capital. The Company's execution to-date across its asset base, including its Kaybob Duvernay and Alberta Montney plays, has resulted in improved asset level returns through a combination of realized efficiencies and enhanced productivity. Crescent Point plans to build on this success by targeting additional efficiencies as it executes its organic growth plan.
As previously announced, given the expected accretion from the Transaction, the Company plans to increase its quarterly base dividend by 15 percent to $0.115 per share, or to $0.46 per share on an annual basis, up from $0.40 per share currently. This base dividend increase is subject to approval from Crescent Point's Board of Directors and is expected to be effective in connection with the first quarter 2024 dividend, which is anticipated to be declared in early 2024.
The Company's leverage ratio, or net debt to adjusted funds flow, is expected to be approximately 1.2 to 1.3 times by year-end 2024, at US$70 to US$75/bbl WTI and $2.75/Mcf AECO. To protect against commodity price volatility, the Company has hedged approximately 35 percent of its oil and liquids production, net of royalty interest, in 2024 and 30 percent of its natural gas production, at attractive commodity prices.
The Company plans to continue allocating 60 percent of its excess cash flow to dividends and share repurchases in the interim and plans to increase this allocation over time as it further strengthens its balance sheet. Crescent Point's strategy is centered around creating sustainable long-term returns for shareholders through a combination of per share growth, return of capital and balance sheet strength.
Crescent Point's annual production is forecast to grow to approximately 260,000 boe/d in 2028 under its five-year plan, driven by the Company's Alberta Montney and Kaybob Duvernay assets, with cumulative after-tax excess cash flow of approximately $4.7 billion at US$70/bbl WTI and $3.35/Mcf AECO. Under this five-year plan, the Company expects to generate excess cash flow per share growth of seven percent on a compounded annual basis, or 15 percent including the benefit from expected share repurchases.
This enhanced profile highlights the strong contribution of the newly acquired Alberta Montney assets, which are expected to provide the Company with a combination of growing production and lower capital expenditure requirements to sustain production in later years. On a per share basis, Crescent Point's cumulative excess cash flow under its five-year plan has increased by approximately 20 percent as a result of the Transaction.
In 2024, the recently acquired Montney assets are expected to produce 56,000 boe/d, growing to 80,000 boe/d by 2026, then remaining flat thereafter. During this same period, development capital expenditures are expected to gradually decline from $400 million in 2024 to $300 million toward the end of the five-year plan, resulting in significant excess cash flow generation.
Crescent Point's combined Alberta Montney and Kaybob Duvernay assets are expected to represent 80 percent of the Company's total production in 2028. Crescent Point's disciplined capital allocation, in combination with its low-decline, long-cycle assets, is expected to allow the Company to also moderate its base decline rate from 30 percent in 2024 to 27 percent toward the end of its five-year plan. During this period, Crescent Point expects to reduce its reinvestment ratio, or capital expenditures as a percentage of funds flow, by nearly 10 percent.
STRATEGIC PRIORITIES AND OUTLOOK
Crescent Point's strategic priorities will focus on operational execution, strengthening its balance sheet and increasing return of capital. The Company's execution to-date across its asset base, including its Kaybob Duvernay and Alberta Montney plays, has resulted in improved asset level returns through a combination of realized efficiencies and enhanced productivity. Crescent Point plans to build on this success by targeting additional efficiencies as it executes its organic growth plan.
As previously announced, given the expected accretion from the Transaction, the Company plans to increase its quarterly base dividend by 15 percent to $0.115 per share, or to $0.46 per share on an annual basis, up from $0.40 per share currently. This base dividend increase is subject to approval from Crescent Point's Board of Directors and is expected to be effective in connection with the first quarter 2024 dividend, which is anticipated to be declared in early 2024.
The Company's leverage ratio, or net debt to adjusted funds flow, is expected to be approximately 1.2 to 1.3 times by year-end 2024, at US$70 to US$75/bbl WTI and $2.75/Mcf AECO. To protect against commodity price volatility, the Company has hedged approximately 35 percent of its oil and liquids production, net of royalty interest, in 2024 and 30 percent of its natural gas production, at attractive commodity prices.
The Company plans to continue allocating 60 percent of its excess cash flow to dividends and share repurchases in the interim and plans to increase this allocation over time as it further strengthens its balance sheet. Crescent Point's strategy is centered around creating sustainable long-term returns for shareholders through a combination of per share growth, return of capital and balance sheet strength.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group