Q1 2020 Earnings Call

Good morning, Ladies and gentlemen, my name is Chris and I will be your conference call operator for Crescent point Energys first quarter 2020 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 webcast 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 management's discussion and analysis for the period ending March 31st 2019 were announced this morning and are available on the Crescent point SEDAR and Edgar website.

All lines have been 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 you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star to.

During the call 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 or factors that could call it that could affect crescent point's operations or financial results are included in Crescent Point's. Most recent annual information form which may be accessed through the crescent point, cedar or Edgar website or by contacting Crescent point energy.

Management also called your attention to the forward looking information and non G.A.P. measures sections of the press release issued earlier today.

I'll now turn the call over to Craig Brexit, President and Chief Executive Officer of Crescent point. Please go ahead Mr. Brexit.

Thank you operator, I would like to welcome everyone to our first quarter 2020 conference call with me today, our canned Lamont Chief Financial Officer, and Ryan grid felt chief operating officer.

As the operator highlighted this conference call is being webcast along with the slide deck, which can be found in our web site.

On todays call, we will discuss our strong first quarter financial and operating results.

How you're managing our business in the later covert 19, and the decisions we've made including our key priorities in response to the current environment.

Our first quarter results show continued progress following our successful 29 team, where we significantly reduced our net debt and improve their cost structure. We have continued to maintain capital discipline and strong execution in 2020, providing us with greater flexibility to manage our business and adapt to new pricing forecast.

In the first quarter, we continued.

Our operational execution, despite shifting to a modified working environment.

Reduced our net debt by completing the 500 million dollar sale versus catch on gas infrastructure assets.

Delivered $50 million, a permanent operating expense savings reduced our capital budget by $75 million with no associated impact to production took decisive action to revise our operations in capital plans in response to rapidly changing macro economic environment.

And continue to actively manage risk through our hedging program.

Our results demonstrate both her command those elements that are within our control and our focus on disciplined and sustainability.

I'm very proud of how are people have responded to the charge of course by covert 19, we all need to play a role and work together and that's very important time to physically distance ourselves and to flatten occur.

Our operational teams and office staff have done a tremendous job to maintain our production in a safe and responsible manner.

While ensuring their own health and safety and that of the communities in which we operate.

Our proactive investments in remote well monitoring and optimize the work flows have given us a competitive advantage and have allowed us to successfully mitigate any negative impact to our field production.

As I mentioned earlier, our focus on safe operations has yielded an impressive result, this quarter and we continue to see positive trends in our hazard identification program and risk mitigation efforts.

We plan to share more detail of our operational execution and safety measures within our upcoming sustainability report, which will be released in June of this year.

Since the start of 2020, we've taken additional measures as part of our operational and capital planning processes to sharpen our focus on returns and protect our balance sheet.

We are proactively adapted to the commodity price uncertainty by reducing our capital activity by approximately 40% shutting in approximately 25000 be we per day of production identifying new cost saving measures across the organization shifting capital through later in the year to provide additional flexibility and making the difficult decision.

And to lower our quarterly dividend and suspend our repurchases under and see IB.

During this period of volatility we are focused on continuing to protect our balance sheet and financial liquidity as well as our long term value of our assets to enhance our overall sustainability over the past two years. Our team is work tremendously hard to steer the company in the right direction. We will continue to maintain a steady hand on the we all keeping a queer eye on our key value drivers.

We will also remain flexible on returns focused and continue to reduce costs, while aiming to balance our cash inflows and outflows to protect our overall financial position.

With that I'll now turn the turn it over to can to provide an update on our financial highlights.

Great. Thank you Greg.

During the quarter ended March 31st 2020, or adjusted funds flow totaled $310 million or 59 cents per share diluted this was driven by strong operating netback of $22.41 a b O <unk>.

The quarter ended March 31st 2020, or development capital expenditures totaled $320 million were approximately half of our revised annual budget.

During the second quarter capital expenditures will be minimal due to normal seasonal breakout and largely limit it to completing projects that were initiated during the first quarter.

As a result of our recent shift in our capital program, we expect team where the bulk of our remaining 2020 budget during the fourth quarter.

The shift provides us with added time and flexibility to make further adjustments straight forward if necessary.

Given our focus on returns and balance sheet strength, we will review any discretionary capital spending in context, so the commodity prices and the overall environment.

Net debt as at March 31st 2020, equated to approximately $2.3 billion down from approximately $3.9 billion in the prior year.

Cash and utilize credit capacity as at March 31st 2020 was over $2.5 billion.

During the quarter, we repaid a senior note maturity of $158 million what their next set of maturities any amount of approximately 185 million not due until the second quarter at 2021.

In addition, our credit facilities are not due for renewal until October 2023.

As a part of our risk management program to protect against commodity price volatility. We have currently hedged on average over 65% of our oil and liquids production net of royalty interest throughout the remainder like 2020.

We remain disciplined in our approach to layering on additional hedges in the context of commodity prices to further protect themselves in 2020 and later years.

Due to significant decrease in the independent engineers price forecast due to concerns over the global demand, it's a black oil.

I think when incurred and non cash impairment charge of $3.6 billion.

$2.7 billion Aftertax, which resulted in a net loss of $2.3 billion for the quarter ended March 30, Onest 2020.

The impairment charge does not impact the company's address defenseflow or its credit capacity and as reversible in future periods should it be indications the change in value, including higher commodity forecast prices.

I'll now turn it over to range, but I think highlights on our operations right.

Thanks, Ken in the first quarter 2020, we produced 141330 Boe per day comprised of over 90% oil and liquids.

As Craig mentioned earlier, we continue to realize internal efficiencies and unit cost savings delivering outperformance in our operational year to date results. These successes have allowed us to reduce our annual budgeted capital spending and operating expenses for 2020.

We recently reduced our annual capital expenditures guidance by $75 million with no associated impacted production and we are also anticipating lower annual operating expenses for the year, which are forecasted to include $50 million of long term sustainable cost savings, we have achieved by continuing to fold.

Yes on enhanced workflows and digital technology.

Since the beginning of 29 team, we have now permanently removed approximately $120 million or or 15% of our annual operating expenses.

As previously announced on April Twentyth, we elected to shut in approximately 25000 Boe per day of production the assets shut in or primarily located outside of our key focus areas and have operating costs above the corporate average.

We will continue to monitor the commodity price environment, including market access and we'll look to restore the shut in wells when warranted <unk>.

I want to highlight that we are taking a measured and staged approach when dealing with shut ins scenarios and we retain significant flexibility should we have to shut in additional production due to economics or potential market access limitations.

We remain on track with their 2020 budget with expected annual production average production of 110 to 114000 BOE per day, which assumes previously announced shut in production remains offline for the rest of the year and planned development capital expenditures of 650 to 700.

Million dollars I.

I would like to commend our employees and specifically our field staff for their dedication and commitment to ensuring we continue to operate safely and effectively throughout this pandemic.

I'll now pass it back to Craig for some closing remarks.

Thanks, Ryan in clothing, I'd like to thank our shareholders for their continued supporting our employees for their hard work and execution in a very challenging environment.

Well, we cannot control commodity prices or the pandemic, we are as an organization doing everything within our power to enhance our flexibility and sure. We emerged from this period of uncertainty in a strong position.

Our high netback assets and are committed workforce form the core of our competitive advantage and they approve in their resilience in a jody and he's trying times.

Our industry and all of us the stakeholders need to work together during this period of rapid change and uncertainty by doing so we can protect each other's health and safety, while ensuring successful long term relationships with all of our stakeholders at Crescent point, we strive to manage our business the right way with continued disciplined operational excellence and.

Focused on sustainability in order to generate value for all our stakeholders on that note I would like to invite those interested to attend our virtual annual general meeting, which will be held next Thursday may 14th. Please see our website for more details I will now open the call for questions from the investment community operator. Please open the life question.

Thank you as a reminder for members of the investment community. If you would like to ask a question. Please press Star then the number one on your telephone keypad.

If you would like to withdraw your question. Please press star too.

We will pause for a moment to compile the Q and a roster.

Your first question comes from Travis would National Bank Financial Charvis. Please go ahead.

Yeah. Thanks, Good morning, Altrus year, all doing well maybe a two part question here first.

You give us a sense of how you're thinking about the budget I know it's been recently sad.

But kind of how you're thinking about that 650 to 700 million.

You think about the forward strip that that front end of the strip continues to compress lower it feels like.

Maybe just some context around the thought process of setting that 650 to 700 and and it's there's much wiggle room left there.

Then the second part that kind of aligns with that is is that the shut in volumes and and is there more shut ins that we could see it if we continue to stay in this kind of 25 to $30 a environment. Those are the two thank you.

Thanks, Travis it's Craig here and I Hope you and your family are all doing well to this maybe what well do as I can take the first part of that and then I'll pass the shut ins to Ryan He's been doing a lot of work on that in the in the background, but.

As far as the budget goes to reset the the new budget. When we brought that press release, so call. It whatever it was not a few weeks ago. The focus for us as a management team was to really have a lot of flexibility within that budget. So if you look at that 650 to 700 million dollar guidance that we've got out there a big component of that.

Is really being spent in the later part of the here. So you know if you look at the remaining capital the majority of that 65% of that capital is in Q4, so that really gives us the flexibility if commodity prices are what they are right now and and.

You know you're looking at a strip price that is a very challenging then look for us to to reduce capital even further to mean discipline on our and our focus on returns.

And try and balance inflows and outflows as best as we can so if we're looking at environment in Q4 that looks.

What we're seeing today look for us to further reduce and then like I say balance inflows and outflows as as best as we can as far the shut ins Ryan do you want to add some color on that.

Yeah, you bet Craig he Travis yeah. Thanks for the question Yeah. So on shut in as you know we initiated a full shut in review back in mid March.

On a well by well facility by facility basis, So in a lot of detail and the decision to shut in or we announced obviously based on a number of factors, including economics market access and well continue to monitor that the commodity price environment differentials and other key factors in order.

To determine if further voluntary shut in decisions are warranted or if springing or the shut in volumes back on is warranted I can say, we've been very proactive in our analysis. So we cannot quickly in logically to execute execute further decisions that will have in front of us.

Okay, Thanks and.

Is the right way to that or how you guys you're thinking about the shut ins is it kind of been buckets of pricing So that's where.

We continue to be 25 to 30, you've identified X amount of wells or certain regions to shut in as we slide up or down on that scale, that's where we'll see that they shut in volumes have been slow.

Yeah, Yeah, you're right Travis Yeah, we looked at it you know at various a number of kind of economic threshold buckets. I'm. Obviously, you know what we announced to shut in a majority of.

The higher cost production and so like I said, a lot goes into it but we've we've got our detailed analysis done and we'll be ready to to execute any further decisions.

Quickly and logically and go from there okay. Great. Thanks, Thanks for taking my questions guys stay well.

Thank you there are no further questions at this time I would now like to turn it over to Mr. bricks I for closing remarks.

Thank you all for taking the time to join our call. Today. If you have any questions that were not answered you can car investor relations team at your convenience and again. Thank you all for taking the time.

Thank you Crescent Point's Investor Relations Department can be reached at 185576769 to three thank you and have a good day.