Crescent Point Energy Corp. (CPG.TO), the Canadian oil driller that fended off an activist investor last year, wrote down the value of its assets by $2.73 billion (US$2 billion) and is putting more holdings on the block as its new chief executive officer targets core operations.
The after-tax writedown reflects the fair value of its assets, many of which were acquired during a crude rally, to account for the current environment of lower prices, Calgary-based Crescent Point said Thursday. The charge doesn’t affect its available credit or its adjusted funds flow, and it isn’t related to the performance of the assets, the company said.
The writedown is more than Crescent Point’s market capitalization. The shares fell 4.4 per cent to $3.90 at 2:15 p.m. in Toronto, giving the company a market value of $2.15 billion.
Chief Executive Officer Craig Bryksa, who took the helm on a permanent basis in September, has been cutting costs and refocusing Crescent Point on its core operating areas, including Saskatchewan and Utah, after the company beat back activist investor Cation Capital’s attempt to take over its board. Crescent Point said Thursday that it has started marketing some conventional holdings in southeast Saskatchewan and some infrastructure assets for sale.
Crescent Point was one of North America’s most acquisitive oil producers during the years leading up to the plunge in global crude prices that started in 2014 and bottomed out about a year and a half later. In the five years through through 2015, Crescent Point bought US$6 billion in assets, including the $576.5 million purchase of Legacy Oil + Gas Inc. that provided a large chunk of its holdings in Saskatchewan.
While Crescent Point hasn’t announced a major acquisition in more than two years, a key benchmark of its cost to develop new resources came in at $23.64 a barrel in 2018, 12 per cent higher than its three-year average. Investors will need to see the company’s new leadership make more progress on that front before they can appreciated its quarterly results and cash flows, said Chris Cox, an analyst at Raymond James.
“The Street will struggle to gain confidence that the company has meaningfully turned the corner with respect to improvements in capital efficiency,” Cox said in a note. However, “we would note that many of the improvements employed under the new leadership were not fully implemented until later in the year.”
Crescent Point had slid 5.7 per cent this year through Wednesday, compared with a 15 per cent gain for the S&P/TSX Energy Index.
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