We view Crescent Point Energy Corp. (TSX: CPG) as a top-tier operator that has developed significant expertise in developing light oil plays in North America. It is also positioned strongly to provide great operating return over a number of years.
Alex Cutulenco | October 30, 2015: Crescent Point Energy Corp. (NYSE: CPG) (TSX: CPG) is one of Canada’s largest light and medium oil producers. Guiding a 163,500 boe/d production and a $1.45 billion Capex spent for 2015, the Company has a significant resource base in Saskatchewan, Canada, as well as in Utah. Ahead of the upcoming Q3/2015 financial results, scheduled to be released on November 5, 2015, we break down the possible factors that may positively affect CPG’s investors.
First and foremost, the Company’s business strategy is defined by three main factors:
• Increasing recovery through the implementation of technology
• Focusing on high-quality and high-upside acquisitions
• As well as providing a safe investment for shareholders through hedging oil and gas prices throughout 2018
The Company is positioned strongly to provide great operating return over a number of years, only recovering very little of its total reserves. The Company has five main assets:
• Bakken (Saskatchewan): 4.6 billion barrels of original oil in place (OOIP) with recovery to date of 3.6%; Q2/15 production ~60,000 boe/d
• Shaunavon (Saskatchewan): 5.3 billion barrels of original oil in place with recovery to date of 1.0%; Q2/15 production ~25,000 boe/d
• Flat Lake (Saskatchewan): 1 billion barrels of original oil in place with low recovery to date; Q2/15 production ~8,400 boe/d
• Midale (Saskatchewan): Large original oil in place with low recovery to date; projected production at 6,600 boe/d
• Uinta Basin (Utah): 5.2 billion barrels of original oil in place with recovery to date of 0.5%; Q2/15 production ~15,000 boe/d
Crescent Point Acquired Legacy Oil + Gas (announced in May 2015, closed June 30, 2015)
Legacy Oil + Gas was a publicly-traded, light oil-weighted producer with approximately 22,000 boe/d of high-netback production, and also used to be an Ubika Energy 20 constituent company.
On June 30, 2015, Crescent Point closed the acquisition for a total consideration of approximately $1.48 billion. The acquisition adds low decline production of 20,000 boe/d and 102.7 million boe of 2P reserves. The acquisition is also expected to be accretive on a debt-adjusted basis to the Company’s production per share by approximately 5-9% in 2016. This was positive news for both of the companies’ shareholders.
Hedging the Price of Oil in This Market Downturn
Crescent Point continues to strengthen its operations by protecting its production from the wild negative fluctuations in the price of oil. As at August 5, 2015, the Company had hedged 54% of its oil production for the remainder of 2015 at a weighted average price of approximately C$88/bbl and 32% for 2016 at a weighted average price of approximately C$83/bbl. The Company’s oil and gas hedge books, which provide added flexibility, extend into 2018 at attractive prices – prices that are almost double crude oil’s current $46/barrel spot price.
We view the company as a top-tier operator that has developed significant expertise in developing light oil plays in North America. As service costs and raw materials costs come down, the Company’s capital efficiencies should continue to improve from historical levels.
Alex can be reach at: alex@gravitasfinancial.com
