Crescent Point Energy Corp. is selling its North Dakota assets for $500 million to an undisclosed private operator.
In the second quarter of 2023, the assets had gross production of approximately 23,500 barrels of oil equivalent per day (boepd), 89 percent of which was oil and liquids, with annualized net operating income of approximately 375 million dollars at a West Texas Intermediate price. of approximately $75 per barrel, Crescent Point said in a press release on Thursday.
With the limited drilling inventory associated with the assets, Crescent Point said it expects production in North Dakota to decline to 18,000 boepd in 2027 and further decline in the coming years.
The transaction is expected to close in the fourth quarter of 2023, subject to receipt of regulatory approvals and satisfaction of customary closing conditions, according to the press release.
Crescent Point said the transaction allows it to “advance the expected future value of the assets, as the proceeds are equivalent to more than five years of excess cumulative cash flow expected from these assets within the plan of long-term development of the company at current commodity prices”.
“Over the past several years, we have taken several strategic steps to optimize our portfolio,” said Crescent Point President and CEO Craig Bryksa. “This transaction allows us to capture the future value of an area with limited scalability while immediately improving our financial position and increasing our focus on our core operating areas.”
Crescent Point plans to accelerate the repayment of its debt with the proceeds of the transaction. The company’s pro forma net debt is expected to be less than $2.2 billion, or less than 1.0 times adjusted cash flow, by the end of 2023 at current commodity prices, for below $3 billion at the end of the second quarter, according to the release.
Crescent Point is lowering its 2023 average annual production guidance to between 156,000 and 161,000 boepd, which represents a reduction of approximately 4,500 boepd compared to the midpoint of its previous guidance range. The company’s revised annual forecast includes the production impact associated with the transaction, net of about 1,000 boepd of overperformance from its remaining assets for the year, it said.
Crescent Point said it is also lowering its development capital expenditure guidance for 2023 by approximately $73.9 million (CAD 100 million), reflecting the elimination of capital it had expected to spend on the North Dakota assets after the closing of the transaction.
Crescent Point has acquired $2.22 billion (CAD 3 billion) of high-quality assets in the Kaybob Duvernay and Alberta Montney since 2018 that were primarily financed through approximately $2.7 billion (CAD 2.7 billion) of non-basic provisions. These transactions have improved Crescent Point’s long-term per-share metrics and are consistent with its strategy of focusing on high-yielding assets with significant inventory depth, the company said.
Meanwhile, Crescent Point reported net income of $156.9 million (CAD 212.3 million) for the second quarter, compared to $245 million (CAD 331.5 million) in the prior quarter previous year, the company said in an earnings release.
The company said it generated $205.45 million (C$278 million) in excess cash flow in the second quarter, supporting debt reduction and returning capital to shareholders.
Average production from Crescent Point in the second quarter was 155,031 boepd, which included the impact of approximately 7,000 boepd from downtime at the Kaybob Duvernay related to the recent wildfires in Alberta. Due to the company’s “strong operational execution and superior production performance” from its Kaybob Duvernay asset during the first half of the year, Crescent Point said it was able to maintain its average annual production guidance with the its capital expenditure budget unchanged.
“Our second quarter and year-to-date results demonstrate our strategic approach to building our portfolio of assets and generating long-term returns for shareholders,” Bryksa said. “Through our recent acquisition of Alberta Montney, we have strengthened our portfolio of scalable, high-performing drilling locations while improving our per share metrics and return on capital profile. This acquisition also gives us the opportunity to create additional shareholder value over time through productivity improvements, cost efficiencies and reserve growth.”
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