Crescent Point close to closing sale on gas infrastructure in Saskatchewan

Crescent Point Energy Corp. has sold nearly a billion dollars worth of assets so far this year, and it appears that the sale of its natural gas infrastructure is next on the horizon, with completion of the sale expected in the fourth quarter of 2019.

Regarding additional sales on the horizon for its other properties in southeast Saskatchewan and southwest Manitoba, a press release from the company said: “The company will also continue to seek and evaluate the potential for additional asset disposition opportunities, where appropriate, to further optimize its asset portfolio.”

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The company executed approximately $950 million of dispositions year-to-date 2019.

Those were some of the details from the third quarter financial results the company reported on Oct. 31.

When asked about the value of those natural gas assets, as listed in the release, at $200 million, chief financial officer Ken Lamont said it was its “historic book value, that’s been depreciated obviously through time. That is not representative of the proceeds we’d be expecting on the transaction.”

He attributed it to the accounting.

“Obviously it’s a strong indication of the process as we’ve moved the assets to ‘assets held for sale.’ We’re moving along in that process. Nothing has really changed our previous guidance to you on that disposition.”

For the quarter ended Sept. 30, 2019, Crescent Point's capital expenditures on drilling and development, facilities and seismic totaled $362.3 million, including $337.1 million spent on drilling and development to drill 133 (126.6 net) wells. President and CEO Craig Bryksa said the budget would be released early in the new year. It would look similar to this year, but there won’t be any real absolute growth.

In response to a question about its Flat Lake area, south of Torquay, Bryksa said, “As Flat Lake goes, it’s been a steady, consistent program there this year. Very pleased with the results. More two-mile wells now than we had in the past, so things on that front look relatively good. That’s an area where we’ve been able to see significant cost savings over the past year.”

Bryksa pointed out they’ve had a net 13 per cent cost reduction year over year in the area.

Crescent Point's average production for third quarter was 155,708 barrels of oil equivalent per day (boepd), comprised of approximately 90 per cent oil and liquids, net of previously announced dispositions that closed during the quarter. Fourth quarter production will reflect the disposition of the company's Uinta Basin asset. The impact of this sale is expected to be partially offset by growth in the company's North Dakota resource play following the completion of several multi-well pads.

By continuing its focus on realizing operating efficiencies, Crescent Point said it achieved further cost savings during the third quarter. As a result of internal workflow optimization and field automation over the past year, the company's operating expenses in 2019 are approximately seven per cent below its original budget, compared to approximately five per cent previously.

This improvement excludes any benefit expected to be realized from its recently announced asset dispositions. The company will continue to seek opportunities to optimize its cost structure, including by further focusing its asset base and increasing field automation.

Crescent Point has converted approximately 150 producing wells to water injection wells year-to-date and remains on track to convert a total of approximately 175 to 200 wells in 2019 as part of its decline mitigation program.

The company's third quarter and year-to-date results continue to highlight management's focus on its key value drivers, including balance sheet strength, disciplined capital allocation and an improved cost structure, it said in a release. This has resulted in significant excess cash flow generation, increased efficiencies and expected net debt reduction of over $1.2 billion by year-end 2019, based on guidance at current strip prices.

Crescent Point's recent asset dispositions further enhance the company's cash flow netback, moderate its decline rate, reduce future decommissioning liabilities and lower the capital required to sustain its annual production as a percentage of cash flow.

Crescent Point's updated annual guidance range reflects continued operational execution and capital discipline with annual average production of 161,000 to 163,000 boepd and capital expenditures of $1.225 to $1.275 billion. This is a narrowing of the guidance range, which was previously targeting production of 160,000 to 164,000 boepd and capital expenditures of $1.2 to $1.3 billion.

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