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Mar 16, 2020

Crescent Point cuts capital spending and dividend

Jon Vialoux discusses Crescent Point

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CALGARY -- More Calgary-based oil and gas producers are cutting spending plans as crude prices fall further and financial analysts lower their stock ratings.

Despite the cuts, stock prices continued to plummet on Monday, with the S&P/TSX Capped Energy Index down 11.5 per cent at midday in Toronto. The measure of the value of Canada's top energy companies has been cut almost in half over the past week.

Producers Crescent Point Energy Corp., Enerplus Corp., Vermilion Energy Inc. and NuVista Energy Ltd. all announced cuts in their 2020 capital budgets on Monday, adding to a list that includes Husky Energy Inc., Cenovus Energy Inc. and ARC Resources Ltd.

"As uncertainty around oil prices remains, we expect more budgets will be reduced along with dividend cuts as well," warned National Bank of Canada in an industry report on Sunday.

"Capex cuts have ranged between 20 and 65 per cent (for its coverage group) and are averaging 31 per cent, while guidance production decreases have ranged between two and seven per cent and are averaging four per cent."

Oil producers have been trimming spending and focusing on cost cutting for years after crude prices fell dramatically in 2015 and 2016.

The latest cuts come as the novel coronavirus outbreak erodes global energy demand and a price war between top producers Saudi Arabia and Russia threatens to flood the oil market with cheap crude.

Crescent Point said it now plans capital spending between $700 million to $800 million this year, down from a range of $1.1 billion to $1.2 billion, and it plans to cut its dividend from a penny per quarter to the equivalent of a penny per year.

It also reduced its production forecast to about 132,000 barrels of oil equivalent per day from 142,000 boe/d.

Enerplus announced a capital spending budget of $325 million, down about 40 per cent from its earlier range of between $520 million and $570 million.

It said it will stop all operated drilling and well completions activity in its key oilfields in North Dakota by mid-April, leaving 32 uncompleted wells to be brought on stream in the future if prices recover.

Production of oil and natural gas liquids is expected to fall by seven per cent to about 51,000 barrels per day, down from previous guidance of about 58,500 bpd.

"We're taking immediate and decisive steps to protect value and maintain our balance sheet strength in response to the rapid deterioration in crude oil prices stemming from simultaneous supply and demand shocks," said CEO Ian Dundas in a statement.

On March 6, Vermilion cut its dividend in half and warned it would reduce its $450-million 2020 budget if oil prices stayed low.

On Monday, it did just that, slicing between $80 million and $100 million from the budget and delivering a further reduction in the monthly dividend to two cents per share from 11.5 cents.

It said the combination would reduce annual cash outlays by about $270 million, "providing greater flexibility to manage our business through this period of depressed and uncertain commodity prices."

NuVista said it plans to spend no more than $240 million on capital projects this year, down from an earlier range of $300 million to $330 million.

Production is expected to be in the range of 54,000 to 57,000 boe/d, compared to the lower end of prior guidance at 57,000 boe/d.