“Our recent Alberta Montney consolidation marks the completion of our portfolio transformation,” said Craig Bryksa, President and CEO of Crescent Point. “Through this strategic transaction, we have enhanced the long-term sustainability of our business, including increasing the excess cash flow per share expected within our five-year plan by approximately 20%. This accretion also enhances our return of capital profile for shareholders.”
2023 operational update. Crescent Point remains on track with its 2023 guidance, which is expected to generate approximately $950 million of excess cash flow for the full year, based on average WTI price of approximately $77.50/bbl for 2023.
In the Kaybob Duvernay and Alberta Montney plays, the company continues to achieve strong operational results that are in-line or ahead of booked type well expectations. In the Kaybob Duvernay, Crescent Point’s most recent multi-well pad within the volatile oil fairway came on stream during Q4 2023 with an average peak 30-day rate of 1,250 boed per well (81% condensate, 5% NGLs).
In the Alberta Montney, Crescent Point brought on stream two multi-well pads during Q4 2023 in its Gold Creek area. The first pad achieved peak 30-day rates averaging 1,350 boed per well (72% light oil, 5% NGLs). The second pad has been on stream for less than 30 days with similar initial production rates.
Non-core asset dispositions. During fourth quarter 2023, Crescent Point entered into agreements to dispose of its Swan Hills and Turner Valley assets in Alberta for total proceeds of approximately $140 million. The company expects production for these assets to average approximately 5,000 boed (75% oil and liquids) in 2024. Crescent Point did not plan to allocate any capital expenditures to these assets in 2024. These dispositions are expected to close by early Q1 2024.
2024 guidance. Crescent Point now expects to generate annual average production of 198,000 to 206,000 boed (65% oil and liquids) in 2024, based on development capital expenditures of $1.4 to $1.5 billion, demonstrating an improvement in production and capital expenditures compared to the company’s preliminary guidance. Crescent Point’s production guidance has changed by 2,000 boed compared to its preliminary guidance, despite the recently announced non-core asset dispositions of approximately 5,000 boed, with $50 million of less development capital expenditures expected in 2024.
Crescent Point expects this program to generate $750 million to $950 million of excess cash flow in 2024, at $70 to US$75/bbl WTI and $2.75/Mcf AECO, and to be fully funded at approximately $55/bbl WTI, including the planned increase to its base dividend.
The company plans to allocate 45% of its 2024 budget to the Alberta Montney, which is expected to generate annual average production of 97,000 boed (50% oil and liquids). Crescent Point plans to maintain three active drilling rigs in the Alberta Montney in 2024, drilling 60 net wells across its land base in the volatile oil fairway. The Company’s operational initiatives include enhancing its drilling and completion design and developing the recently acquired Montney assets by optimizing the number of wells drilled per section.
Crescent Point plans to allocate 35% of its 2024 budget to the Kaybob Duvernay, which is expected to generate annual average production of 50,000 boed (60% oil and liquids). The company plans to maintain two active drilling rigs in the Kaybob Duvernay in 2024, drilling 45 net wells across its land base within the volatile oil and liquids-rich fairways, supporting production growth during the second half of the year and into 2025. This budget includes drilling longer lateral wells to improve efficiencies and further delineation of its land position, including the eastern and western portion of its land base.
Crescent Point plans to allocate the remaining 20% of its 2024 budget to its long-cycle, low-decline assets in Saskatchewan, which are expected to generate annual average production of 55,000 boed (95% oil and liquids). The budget includes the continued advancement of decline mitigation programs, including waterfloods and polymer floods, in addition to further development of open-hole multi-lateral (“OHML”) wells. Crescent Point’s low-decline, high netback Saskatchewan assets are expected to account for approximately 50 percent of the Company’s excess cash flow in 2024.
Like prior years, the company will continue to allocate a portion of its capital to longer-term projects and environmental initiatives, which are expected to represent 10% of total expenditures, including reclamation activities.
Five-year plan. Crescent Point’s annual production is forecast to grow to approximately 260,000 boed in 2028 under its five-year plan, driven by the company’s Alberta Montney and Kaybob Duvernay assets, with cumulative after-tax excess cash flow of approximately $4.7 billion at $70/bbl WTI and $3.35/Mcf AECO. Under this five-year plan, the company expects to generate excess cash flow per share growth of seven percent on a compounded annual basis, or 15%, including the benefit from expected share repurchases.
This enhanced profile highlights the strong contribution of the newly acquired Alberta Montney assets, which are expected to provide the company with a combination of growing production and lower capital expenditure requirements to sustain production in later years.
In 2024, the recently acquired Montney assets are expected to produce 56,000 boed, growing to 80,000 boed by 2026, then remaining flat thereafter. During this same period, development capital expenditures are expected to gradually decline from $400 million in 2024 to $300 million toward the end of the five-year plan, resulting in significant excess cash flow generation.
Crescent Point’s combined Alberta Montney and Kaybob Duvernay assets are expected to represent 80% of the company’s total production in 2028. Crescent Point’s disciplined capital allocation, in combination with its low-decline, long-cycle assets, is expected to allow the company to also moderate its base decline rate from 30% in 2024 to 27% toward the end of its five-year plan. During this period, Crescent Point expects to reduce its reinvestment ratio, or capital expenditures as a percentage of funds flow, by nearly 10%.
