Q3 2019 Earnings Call

Good morning, Ladies and gentlemen, my name is Sylvia and I will be a conference call operator for Crescent point Energy Q3, 2019 conference call.

This conference call is being recorded today and will be webcast, along with a slide deck, which can be found on crescent Point's website homepage. The website may not be recorded or rebroadcast without the express consent of Crescent point energy all amounts discussed today are in Canadian dollars unless otherwise stated.

The complete financial statements and managements discussion and analysis for the period ending September Thirtyth 29 team were announced this morning and are available on the Crescent point CR and they've got website.

All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question answer session for members of the investment community. If he would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if he would like to withdraw your question. Please press star and the number two dreams.

Cool management may make projections or other forward looking statements regarding future events or future financial performance actual performance events or results may differ materially.

Additional information on factors that could affect crescent points operations or financial results are included in the Crescent Point's. Most recent annual information form which may be accessed Twitter Crescent point see dart orders our website.

By contacting Crescent point Energy management also called your attention to the forward looking information and non-GAAP measures sections to press released earlier today.

I will now turn the call over to Brad Burke, our senior Vice President corporate planning and capital markets. Please go ahead Sir.

Thank you operator, and I'd like to welcome everyone to our third quarter 2019 conference call with me today are Craig Brexit President Chief Executive Officer, Ken them on Chief Financial Officer, and Ryan Good felt chief operating officer.

Other members of our senior leadership team are also present to provide additional insight during the question and answer period at the end of the cool.

As the operator highlighted this conference call is being webcast along with the slide deck, which can be found on Crescent Point's website.

I'll now pass the call the Craig to provide an overview of crescent 0.3rd quarter and 2019 result.

Thanks, Brad and thank you everyone for joining us today Crescent Point's third quarter results demonstrate our continued commitment to strengthening our balance sheet being disciplined in our capital allocation and becoming an even more efficient company just over one year ago. We set a plan motion to transform this company and I'm happy to report on our progress in delivering on each of our key value.

Drivers.

To strengthen our balance sheet, we committed to reducing our net debt and focusing on returns versus production volume growth.

Allowing for excess cash flow generation during the year by doing so we've reduced our net debt by approximately $650 million at the ended the third quarter and we expect total reduction in net debt of over $1.2 billion by year end 29.

Hi, being disciplined we have significantly strengthened our balance sheet improve their financial flexibility during a period of all time low commodity prices.

We've also committed to being disciplined in our capital allocation and focusing or asset base.

We're continuing our work to reduce the number of areas in which we operate by shedding non core assets where appropriate to create value for shareholders.

I'm pleased to report that as of October Thirtyth, we've completed approximately $950 million of asset sales and continue to work towards executing additional dispositions.

Through these dispositions, we have further enhanced our sustainability by improving our corporate average netback, lowering our cost structure and royalties and reducing the capital we required to sustain our annual production.

In addition to the benefits we are achieving by focusing our asset base. Our team has driven internal cost efficiencies throughout the organization.

As of the ended the third quarter 2019, or operating expenses prior to dispositions were approximately 7% floor budget and our capital costs were down 10% compared to the prior year.

These internal efficiencies further support excess cash flow generation and make the company more resilient to shifting commodity prices.

We've also repurchased four cancellation approximately 13.8 million shares year to date under NC IP for total consideration of approximately $71 million are 2019 budget currently assumes a total of $125 million of share repurchases during the year.

By continuing to execute on our strategy, we have placed the company in a much stronger position, allowing us to continue to generate shareholder value I'll now hand, the call over to can to discuss our third quarter financial results [noise].

Thank you Craig.

During the third quarter of 2019 Crescent point generated adjusted funds flow approximately 389 million or 71 cents per share fully diluted.

This performance was driven by strong a strong operating netback of approximately $31 per Boe.

Third quarter capital expenditures totaled 365 million.

Which approximately 337 million was spent on drilling and development to drill approximately 127 net wells [laughter] during the quarter. We returned approximately 20 million of capital to shareholders through dividends and share repurchases will also reducing our net debt by over 190 million.

We recorded an after tax net loss of 302 million during the quarter due to approximately 322 million of non cash charges, resulting from our recent asset dispositions.

On an adjusted basis, our net earnings during the quarter was approximately positive 33 million.

We remain on track to meet our annual guidance kind of narrowed our guidance range, reflecting our continued operational execution and capital discipline. We're now guiding for an annual production range of 161, 263000 BOE a day, what capital expenditures of 1.2 to 5 billion to 1.2.

Seven 5 billion.

Subsequent to the quarter, we extended the renewal date of our credit facilities to October 2023, and elected to reduce the size of the facilities.

3.6 billion to 3 billion.

This reduced size saves us money well also providing significant.

Its ability to meet our post disposition needs.

We're very pleased with this process as we received strong renewal commitments from our syndicated 14 banks under covenant terms that remain unchanged.

Based on our expected net debt at year end 2019, including previously announced dispositions and budget a share repurchases are unutilized credit capacity is expected to provide approximately 2 billion of liquidity.

We have no material near term senior note maturities and we'll continue to evaluate opportunities to term out any remaining bank debt similar to prior years.

We remain focused on debt reduction in our in our capital allocation process as we complete additional dispositions.

We will seek opportunities to further enhance our balance sheet strength and allocate capital to incremental share repurchases [noise].

Our hedging program provides us with additional financial flexibility as that October 20, Fiveth 2019, approximately 49% of our fourth quarter oil and liquids production was hedged at an average price of approximately $79 per barrel Canadian.

For 2020 more than 35% of our production is hedged at approximately $77 per barrel Canadian in excess of current forward strip prices.

I'll now pass the call to Ryan to discuss our operating results Brian .

Thanks, Ken Crescent Point's average production in third quarter of 155708 BOE per day was comprised of approximately 90% oil and liquids and was net of dispositions completed during the quarter within our key focus areas. We continue to advance our infill in waterflood development programs and move towards.

Two miles horizontal wells within the flat Lake play.

We expect that our fourth quarter production will benefit from the completion of our multi well pad drilling program in North Dakota, which should also result in an increase to our oil waiting relative to third quarter.

Our operating cost savings to date have amounted to approximately 7% prior to the impact of dispositions. We have achieved these efficiencies by implementing new workflows and advancing automation within our field operations.

By year end, we expect to have installed remote monitoring tools and approximately 50% of our operations within are a key focus areas with additional installations expected in the coming year.

We are using this technology to enhance the benefits of our new work flows, which ultimately generates lower costs and better run time on our overall operations.

We've also continued to improve our capital costs through gains made by our supply chain and drilling completions in facility teams, who are being diligent in optimizing our processes and identifying internal efficiencies year to date. These teams have realized over $90 million in capital efficiencies relative to the prior years cost structure.

And we remain on track to meet our 2019 capital expenditures guidance.

Similarly, we have improved our decline mitigation through our waterflood programs today, we have converted approximately 150 net wells to waterflood injectors and remain on track with our budget of 175 to 200 conversions for 2019.

We continue to progress the monetization of our gas infrastructure assets into Scotch win and have been pleased with how this process has developed to date, we continue to expect to finalize this disposition in the fourth quarter of this year.

I want to acknowledge our operations team and field staff, who have played key roles in making our organization more efficient I'd like to thank them for their hard work dedication and continued focus on safe operations I'll now hand, the call back to Craig for closing remarks, Thanks, Ryan in closing I want to reinforce.

Our commitment to our key value drivers of strengthening our balance sheet being disciplined in our capital allocation and enhancing efficiencies across the company.

Collectively these transformative changes will result in a more sustainable financially strong resilient company that will continue to generate shareholder value.

We're currently in the process of establishing our budget for 2020, which we expect to release early in the new year. We plan to maintain are focused on returns versus production growth free cash flow generation balance sheet strength, and returning capital to shareholders and accretive manner I.

I'd like to thank our shareholders and employees for their continued support engagement I.

I'd also like to extend the special thanks to Bob find them in who is retiring from our board for personal reasons.

Bob has served on our board for the past six years. Most recently as chair. He is a firm believer in the positive changes, we're making and I'd like to thank him for his guidance. We wish you all the best.

Succeeding Bob as chair of Crescent Point's Board will be Barber Monroe effective immediately the transition will be seamless due to barber's wealth of experience and her leadership on the board since she joined in 2016.

I'll now open the call for questions from the investment community.

Operator, please open the lines for questions. Thank you, Sir ladies and gentlemen, as mentioned if you do have a question. Please press star followed by one I know you touched on phone you will hear a three Tom prompt acknowledging you request and if you would like to withdraw your question simply press star followed by too and we do after that ill speak.

A phone please lift the handset before pressing <unk>.

And your first question will be from Travis fluid at National Bank. Please go ahead.

Well Yeah. This question might be for Ken.

Just looking at a couple of the items and the balance sheet and I notice.

Some of the value that are attached to the infrastructure you classify them now as held for sale and there's about 200 million. There that's held for sale within that category.

Maybe could you talk about that as it relates to possible market value and that number just seems a lot lower than what I would have been expecting for.

We think about a true potential transaction.

Thanks, Travis so maybe past that Ken.

Great Travis Yeah, I can confirm that that is the historic book value.

And that's been depreciate. It obviously through time, so that is not representative of the proceeds that we'd be expecting on the transaction. So.

That's kind of the way the accounting works and then obviously as we move forward to the extent that we.

Close the deal that's when we'd recognize gain.

It's the proceeds obviously are in excess of that book value. So it's just the historic book value that we've moved over on for accounting purposes in the assets held for sale.

Okay and then.

Not to play on the spot, but kind of any any update in terms of that process and how that those discussions continue to do.

Sure I mean, obviously, a there's strong indication of where we're at in the process given that we've now moved these assets into assets held for sale.

So we're continuing along in that process and nothing has really changed as far as our previous guidance to two you on that I'm not disposition.

Okay.

That's all from me thank you.

Thanks.

Thank you once again, ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on your Touchtone phone.

And your next question will be from Amir.

Amir.

Crummack. Please go ahead.

Thanks, Good morning, guys I understand you won't be putting out your capital budgets early next year, but it was just curious if you can give us some goalpost for us to think about in terms of what oil price.

You would start.

Production growth becomes more apparent or at what price.

Any additional debt reduction is required I mean, even though your leverage as has been cleaned up quite a bit.

Current strip prices.

Thanks, Amir it's it's Craig here I'm, So we'll put our budget out early in the new year. So look for us to be fairly similar to what we are this year like like we've mentioned in the past the focus would be around returns and free cash flow generation.

There won't be any real absolute growth in that budget is the way we're looking at it now and then when you mentioned our debt reduction we've got target leverage out there. It's a high commodity price environment in high I would say 60 bucks, we'd like to be below one times and then we've also mentioned.

The past that at a low commodity price environment call that 40, $550, we'd like to be below two times. So you know those leverage measures for us haven't changed so look for us to stay fairly consistent to that in next year's forecast as well.

Okay and is there any operational update on a shelter for any place in terms of your own activities are flat Lake.

As far as he showed Duvernay goes we're just in the process of completing our second well here. So we'll have results over the next few months on that we'll see how that plays out obviously, it's exciting for us as well and then as far as as.

Late goes it's been a steady consistent program in there this year very pleased with the results drilling more two mile wells now than we had in the past I'm. So things on that front look look relatively good and that's an area, where we've seen been able to see a significant amount of cost savings and efficiencies over the last year.

So I'm really pleased with what the operations team has done on that when you look at that area of our costs are down in that 13% range year over year. So it's actually been quite exciting for us this year.

Thank you.

Thank you.

As a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.

As mentioned, ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone.

And at this time I would like to turn the call back to our host.

Thank you for taking the time to joined our call. Today. If you have any questions that were not answered you can car investor relations team at your convenience. Thanks, everyone.

Thank you.

Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending and at this time, we do affect you. Please disconnect your lines.

The rest of your day.

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