Q3 2023 Crescent Point Energy Corp Earnings Call
[music].
Good morning, Ladies and gentlemen, my name is John and I'll be your operator for Crescent point Energy's third quarter 2000.
So 23 conference call.
This conference call is being more day to day and will be webcast, along with a slide deck, which can be found in question points website homepage.
The webcast may not be recorded already broadcast without the express consent of Crescent point energy.
All amounts discussed today are in Canadian dollars with the exception of West Texas Intermediate.
Pricing, which is quoted in U S dollars.
The complete financial statements and management's discussion and analysis for the period ending September 32033.
And Alex this morning, and are available on Crescent point's, either plus and Edgar web sites.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session for members of the investment community. If you would like to ask a question over the phone line. During this time simply press Star then the number one on your telephone keypad.
I would like to withdraw your question. Please press star two.
During the call management may make projections or forward looking statements regarding future events or future financial performance.
Actual performance events or results may differ materially.
Additional information or factors 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 SEDAR plus edgard.
Edgard websites or by contacting Crescent point energy.
Management also culture attention to the forward looking information and non-GAAP measures sections of the press release, you said earlier today.
Now I'll turn the call over to Craig <unk>, President and Chief Executive Officer at Crescent Point. Please go ahead Mr. Richter.
Thank you operator.
I'd like to welcome everyone to our third quarter 2023 conference call with me today are Ken Lamont, Our Chief Financial Officer, and Ryan <unk>, Our Chief operating officer.
As the operator highlighted this conference call is being webcast, along with a slide deck, which can be found our website.
We're continuing with our new conference call format to at a level of further engagement and to turn the call into more of a discussion.
Earlier today, we issued our quarterly press release financial results and an updated corporate presentation each of which can be found on our website.
During this call ill provide a brief strategy update highlight our results and discuss our overall outlook.
Then move into a Q&A session, we will start taking questions over the conference line as we usually do once those questions have concluded I will then turn the call over to Sean <unk>, Our vice President of capital markets will moderate questions for participants joining us on our webcast.
Those on the webcast to submit questions using the chat function on the online portal.
We look forward to the discussions that this format will provide let's get started.
It has been a busy year of Crescent point as we continue to execute on our portfolio optimization strategy are.
Our recent acquisition in the Alberta Montney has generated strong returns for the company and we have been impressed with the operational results achieved to date, which I will speak to shortly.
We've also been active on the disposition side to further streamline our portfolio, which included the sale of our North Dakota assets, which closed subsequent to the quarter.
This transaction allowed us to bring forward the future expected value for this area, while also strengthening our balance sheet.
These transactions are consistent with our strategy to focus our portfolio on high return high netback short and long cycle place.
This balanced portfolio allows us to deliver sustainable long term returns for our shareholders through a combination of disciplined per share growth a significant return of capital and our balance sheet strength.
I want to spend a few minutes touching on our Alberta Montney as we are very excited about this addition to our portfolio and our results to date.
From a strategic perspective, the Alberta Montney provides a deep drilling inventory.
Positioning within the volatile oil window, consistent geology with significant resource in place and the opportunity to enhance returns through drilling and completions optimization.
Since entering the play we continue to achieve consistent and repeatable results that are in line or ahead of our expectations, including some of the highest productivity wells in the entire western Canadian sedimentary basin.
At Gold Creek West for example, our most recent pad brought on stream achieved peak 30 day rates of 1200 Boe per day per well with a high liquids weighting of nearly 70%.
In addition to these results. We are also making progress on reducing costs and are evaluating opportunities to develop certain areas of the play at tighter spacing that would provide additional drilling inventory.
We are currently running a one rig program in the Montney, but we'll be evaluating eventually looking to add a second rig.
To further accelerate the high return development of our deep inventory in the play.
Altogether. The addition of these montney assets has significantly enhanced the quality of our overall portfolio in the company's long term outlook.
Shifting to the key Bob Duvernay, we continue to generate very strong consistent results, which has been a major part of our own production in 2023.
If you recall when we adjusted our 2023 production guidance to reflect our recent North Dakota disposition, our outperformance largely driven from the keyboard duvernay allowed us to partially offset the volumes that were sold.
Our latest K, Bob pad, which came on stream during the third quarter was ahead of our type well forecast with peak 30 day rates of approximately 500 per day per well.
ZIP over 80% liquids.
What's notable from these results is that they are.
They are more than double those of an offsetting pad from the previous operator prior to our acquisition in 2021 and it is located on the eastern portion of our land supporting future development in the area and investment in infrastructure in 2024.
These results also highlight the benefits of our optimized well design and completion techniques.
Our key Bob Duvernay in Alberta, Montney assets are both expected to generate a combination of sustainable production growth and excess cash flow generation for the company in the years ahead.
Within our longer cycle operations, we are generating strong net backs and excess cash flow as we progress our decline mitigation programs to enhance ultimate recoveries from our large oil in place pools.
Our waterflood and polymer flood operations continue to support strong oil production within our Saskatchewan holdings, resulting in a low decline rate of approximately 15%.
We've also achieved great success in proving up our open hole multilateral well designs with strong results to date and the few fueled backup.
We recently improved the design of these wells to extend our laterals to enhance production and reduce costs through drilling efficiencies.
Our latest wells using this approach consists of approximately two mile laterals across eight lakes, which significantly increases reservoir contact and oil production.
We recently achieved peak 30 day, well results of over 300 barrels per day from our most recent two wells.
With 100% oil weighting and very attractive economics.
We are excited about this innovation as it has enhanced our overall returns and added new premium locations to our drilling inventory.
Look forward to piloting this approach in other areas within our Saskatchewan.
Looking ahead, we couldn't be more excited about our outlook. Our preliminary 2020 for budget forecast production guidance of 145000 to 151000 Boe per day, and excess cash flow generation of approximately $1 billion at.
At $80 per barrel WTS prices.
Further out our five year plan forecast production growing to 180000 Boe per day by 2028, representing a 5% compounded annual growth rate driven by strong production growth from our Montney and Kebob assets.
This growth is balanced by our low decline production in Saskatchewan, which allows us to maintain consistent decline rate throughout our plan to further enhance our excess cash flow generation.
In total we expect to generate over $4 3 billion of cumulative after tax excess cash flow through 2028 at $75 per barrel WTS prices, 60% of which is earmarked to be return directly to our shareholders.
I'd like to thank everyone for their continued support and engagement in particular, our staff, who continue to deliver on our purpose of bringing energy to our world the right way.
Now open the call to questions from our from the analyst community and follow with a Q&A session for those on the webcast operator, please open the call.
Thank you, ladies and gentlemen, we will now conduct a question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone you will hear at Toledo, and prompt Nox nitrogen your request.
I would like to cancel your request. Please press star two please.
Please ensure you lift the handset if you're using a speaker phone before pressing any keys.
Your first question comes from the line of Amir <unk> from <unk> capital. Your line is now open.
Thanks, Good morning, guys, Craig just a few quick operational question for you just.
The Duvernay could you give us some color on that new pad that you referenced in the northern part of your acreage at the volatile oil window.
I think you had mentioned there was a strong initial results sometime I'm, taking you don't have 30 day rates yet.
Yes, so we've got we brought to <unk>.
New pads on in the quarter Amir.
One that we mentioned in the press releases at FCA to six pad that came on at around 500 Boe per day per well at just about 80% liquids. So a very good path for US and then we've got a pad in the northern part that is as.
Coming through flow back in the second quarter and has just been brought on line here now it looks very encouraging looks fairly good. It's just we don't have an IP 30 on that one yet so as we get more well results and more time.
On production look for us to then bring those volumes for it but again very encouraged by.
Both those two paths here over the last.
Quarter, and then the one thing I would add to our mirrors, what one of the thing that we really love about the duvernay since we've been in there is just how consistent and repeatable. These results have been.
And as you combine that with what Brian's team and the operations front have been doing with our cost structure.
And then the repeatability and the predictability of the ultimate well results, it's really starting to drive some very very very compelling returns so exciting for us and.
No two amir that rig two is now operating.
In the play for us as well to now so going forward with two fold drilling rigs.
Your next question Luiz, yes from the line.
Your next question comes from the line of Travis Wood from National Bank Financial Your line is now open.
Okay.
Thanks for taking my question I wanted to touch on tax.
A lot of your peers.
Shifted over to be taxable cash taxable here through last year end and this year.
How does cash tax looks for you guys going forward on kind of current pricing I know I think the presentation kind of highlights, 510% plus or minus.
Next year, but is there is there a scenario that we're sorry in 2025.
But is there a scenario that would.
Accelerate that's P cash taxable in 2024 by chance.
Hey, Travis Thanks for the question I'll pass it over to Ken.
Hey, Travis.
So I guess for the first part of your question as we said on the strip pricing right now we will be paying zero taxes in 2024, and then that will be taxable at an effective rate of about 6% in 2025.
And that's relative to cash flow. So we don't see taxes at strip until.
Until 2025 and that will be at 6% now the second part of your question do I see a scenario I do have a model run that if we hit $100 oil here today and keep that flat, we would have some taxes coming into 2024 kind of in that 5% range. So that would be the sensitivity there we'd need to see a $100 oil here.
<unk>.
Okay.
That's perfect color on that so zero next year.
High probability at zero, and then a modest <unk>, 6% and into 2025.
One more question, just just I guess operationally.
Not related to the duvernay or the montney, but given a lot of.
Open hole.
<unk>.
Acceleration and some older.
Well vertically delineated plays what.
How many wells are you thinking that you would drill across view field with that multi lat strategy on those open holes that you announced.
With the quarter and then with those two wells does that make for total since you first started talking about that open hole.
Pushing the boundaries.
Field.
Charles It's Ryan I can take that one.
Yeah. So so really encouraged with those two most recent results.
We've actually we've actually done eight.
To date now.
Ranged from.
One milers one five meters to.
<unk> These last couple the.
The good thing about them too as we brought in our two mile costs down to under $3 million. So.
<unk> continued to increase the economics on those.
And based on that we have eight planned in view fields next year.
And then we also spud our first one in our Shawn in play here, So probably wont have results before the end of the year on that Jonathan well, but pretty excited to see what what we will get there all of our various reservoir simulations we ran there.
We're kind of doing the same design.
888 legs 60 meter spacing, so really looking forward to see what we can get in our sort of in play.
Okay and is the right way to think about this part of the operational strategy is it.
Is it more so related to capturing especially at newfield.
Improving our recovery and or is it pushing the boundaries of the play and capturing some maybe some.
Some more growth opportunity or is it more about.
The original oil in place.
Yes, I would say both travelers. So the first the reason that we start to try and this was in some parts of the play where it's a little bit thinner, but more more porous more permeable.
It also had the wet large pool above so fracking you ended up <unk> into that wet logical and bringing in water. So.
So now with the results we're seeing to.
To your point on is it.
Is it just capturing more resource or is it economics, it's both.
You're essentially getting in our view almost double the EUR at a little bit less capital. So.
Obviously, your economics look a lot better than doing it with the.
With our older styling, all eight wells per section in fracking so.
So yes, hopefully that answers your question there and like I said, we'll continue to.
We'll continue to drill we have eight wells planned for next year and I don't think this is I don't think this is.
Something that will add rigs to get to I think it's just helps.
Continue to keep our Saskatchewan production and that decline rate manageable.
And adds to our our years of drilling inventory versus adding rigs to get after it. So that's our that's our current plan right now with the results received.
Okay, perfect that makes sense, thanks for the color.
Yes.
Thanks Travis.
There are no further questions at this time at the phone line I will now hand over to Mr Creek brick Sir please continue.
John do you want to moderate from the webcast, yes. Thanks, Craig So a couple questions coming from the online portion.
It's just based on success, we've been having on the Montney well results one of the shareholders was just asking if we can provide a little bit more color on our modified well design or product technology that we're using in the body.
Specifically around those elevator fracs.
I can give a little bit of color and then running can add some comments.
Extremely happy with how the operations have been going here in the montney over over the last few months since we closed that deal.
As far as operations go over on currently on our fourth pad drilling and drilling has been going very well.
One of the things when you look at our our position within the Montney from a geological aspect is we are in the normal pressured.
Window within the play we are in the volatile oil window and we're on the normal pressured position within that play and then when you look across the benches from the Montney C. The b and the a.
<unk> into the a there is no real change in the pressure gradient between those different benches, so really what thats, telling you. There is no real natural fracture barriers between the benches within the play so.
What we've been doing is drilling the wells at the bottom of the sea.
And then hitting them with a very modern completion style modern frac call. It three times per meter and then because of that pressure gradient doesn't change on us and no natural frac barriers in there it allows us to fracture through the C b and into the eight.
So you get very good vertical height growth within the completion, you don't get as much.
Horizontal.
Both are half length growth, but certainly get a lot of vertical growth and that that has led to some very very encouraging results here in the near term. So look for us to continue to push this as we continue to develop it but so far so good and then the other thing with this is as we space the wells in particular and Gold Creek West.
Because of the vertical height growth and maybe not as much of the half length that it may allow us to tighten up that spacing, a little bit tighter which would ultimately.
Add to well inventory, but we'll we'll slowly dip our toes into that as we see results that dictate.
Brian I don't know if you had.
Ill actually maybe add.
Even on the on the cost side like Craig said.
What's key is we are getting.
Consistent repeatable results and.
On budget and.
An exciting thing for us we switch switched over our rig in the Montney too to another rig its a walking double rig.
<unk> has lots of advantages.
A large pumps higher hook loads et cetera et cetera.
And we think with time, we're going to be able to shave a day or two off of our off of our drilling days and continue to to decrease our costs. So.
Excited to do that as well.
Okay, great. Thanks, guys shifting.
Shifting to K ball, a bit and on that topic of well spacing.
One question here, specifically, how do we think about infill spacing here versus the prior operator.
Typically either by phase windows or how we've approached this et cetera.
I can start and Ryan can add some color. So when you think of when we entered the play in 2021, we had our well inventory spaced fairly wide at 600 meters.
When you look at maybe some of the other operators in the area or even the previous operator that we pick the asset up from.
Spaced wells fairly tight and creep in fairly tight and we could see that from a lot of that there is some inter well interference and thats why we took that wider stance.
Over the last basically 12 months to 18 months, we've slowly been creeping in.
So you've seen us move in particular in the volatile oil window into that from 600 meters into 500 meters.
We'll see how things play out on that the results are very encouraging and even that last Pat I just mentioned that FCA dollars six pad at 500 BOE per day is spaced at that level. So look for us to maybe slowly tightening a little bit more and see how they get.
And then.
The other thing I would say in each of the different phase envelopes.
Fairly different pressure regimes as well so the spacing might be different between each of those and that's reflected in how we've been drilling but.
The idea is to slowly creep in make sure we're comfortable.
And then start to optimize so things on that front have been really looking good and Ryan I don't know if you want to yes.
I think I have much such that other than like Craig said, it definitely depends where you are in the play we have.
Very rigorous detailed reservoir models that we continue to update with the results that we're getting.
And.
So far we like what we're seeing with with our current spacing plants.
Okay. Thanks, guys.
All up to that specific you're going to keep up as well.
He plans to develop on the western side.
All total searches.
Yes, so when you look at.
Brian and I were staring at each other they are and who is going to talk through it but yes. When you. So when you look at our 2020 for budget again very active two rig drilling program and certainly we are looking to get a pad on the western side there the volatile oil window, we're going to do that this year in 2024, and then we'll see how that ends up playing out one thing that does.
Give us comfort on our land position in there.
Is some of the offsetting competitor wells that have really proven up that land position for us so you'll see us get a pattern. There. This year as we get those results online then we will certainly put those into into the market, but encouraged by everything that were seeing yes.
Yes, sorry, I had to give my direction straight there.
Yes, 2000, 22024, or 2024 key Bob Duvernay drilling program is quite exciting.
Like Craig said, we're stepping out to the west where actually we actually spud the well.
To the South East here.
Recently, and we will have production rates early next year. So, yes really looking to see what these results can do to expand our drilling and drilling inventory and continue the momentum in the play.
I appreciate it guys.
At this time there are no additional questions from those online. So we want to thank everyone for joining our call today and if you have any questions that were not answered please call our investor relations team at your convenience.
Thanks, everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.