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Feb 24, 2021

Crescent Point vows to pay down debt from Shell acquisition with rising oil profits

Cole Kachur discusses Crescent Point Energy


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CALGARY -- The CEO of Crescent Point Energy Corp. says the company is poised to benefit from rising oil prices after two years of transformation through selling assets, cutting debt and reducing costs.

The Calgary-based company's move last week to buy producing light oil shale assets in Alberta for $900 million from Royal Dutch Shell reflects that confidence, Craig Bryksa said.

"We have built an asset portfolio that is well-positioned to benefit from a rising price environment given our light oil weighting and high netbacks," he said on a Wednesday conference call with analysts to discuss the company's fourth-quarter results.

"We expect to generate $375 (million) to $600 million of excess cash flow this year at US$50 to US$60 WTI (West Texas Intermediate) prices."

The company plans to devote most of that cash flow to paying down debt, he said, adding that it will evaluate increasing returns to shareholders over time.

Shell is to receive $700 million in cash and 50 million Crescent Point shares under the deal and will wind up owning an 8.6 per cent stake in Crescent Point if it closes as expected in April.

The companies say the assets are producing around 30,000 barrels of oil equivalent per day from more than 270 wells. About 57 per cent of production is condensate, highly valued as a diluent blended with oilsands bitumen to allow it to flow in a pipeline.

Analysts said the company beat their fourth-quarter estimates on production and average selling prices although both measures fell compared with the same period in 2019.

"CPG closed the chapter on a highly successful year in its business transformation toward becoming a more sustainable producer generating significant free cash flow, which should be complemented by the upcoming (Shell) acquisition," Desjardins analyst Chris MacCulloch wrote in a report.

Crescent Point reported producing 111,000 barrels of oil equivalent per day, about 90 per cent crude oil and petroleum liquids, in the fourth quarter, down from 145,000 boe/d in the fourth quarter of 2019. It attributed the drop to capital spending cuts enacted early in 2020 as oil prices fell.

It's average realized fourth-quarter oil price was $49.40 per barrel, down from $65.27 in the year-earlier period.

It reported a fourth-quarter net loss of $51 million or 10 cents per share, compared with a loss of $932 million or $1.73 per share in the same period of 2019.

On Wednesday, it confirmed 2021 production guidance released with the Shell announcement last week of about 134,000 boe/d, as well as a 2021 capital budget of about $600 million (both assuming the deal is closed).

That's up from Crescent Point's average output of 121,600 boe/d during 2020 and down from actual 2020 capital spending of $655 million.

The company reported net debt of about $2.1 billion at year-end, paid down by over $615 million during the year. It said it also removed about $60 million in budgeted operating expenses in 2020.