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 were oil and liquids, with an annualized net operating income of approximately $375 million at a West Texas Intermediate price of approximately $75 per barrel, Crescent Point said in a news release Thursday.
With the limited drilling inventory associated with the assets, Crescent Point said it expects the production in North Dakota to decrease to 18,000 boepd by 2027 and decline further in future years.
The transaction is projected to close in the fourth quarter of 2023, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions, according to the news release.
Crescent Point said the transaction allows it to “bring forward the expected future value of the assets, as the proceeds equate to over five years of the cumulative excess cash flow that was expected from these assets within the company’s long-term development plan at current commodity prices”.
“Over the last few years, we have taken several strategic steps to optimize our portfolio”, Crescent Point President and CEO Craig Bryksa said. “This transaction allows us to realize future value for an area with limited scalability while immediately enhancing our financial position and increasing our focus on our core operating areas.”
Crescent Point plans to accelerate its debt repayment with the proceeds from the transaction. The company’s pro-forma net debt is expected to total less than $2.2 billion, or less than 1.0 times adjusted funds flow, at year-end 2023 at current commodity prices, down from $3.0 billion at the end of the second quarter, according to the release.
Crescent Point is lowering its 2023 annual average production guidance to between 156,000 and 161,000 boepd, which represents a reduction of approximately 4,500 boepd in comparison to the midpoint of its prior guidance range. The company’s revised annual forecast includes the production impact associated with the transaction, net of approximately 1,000 boepd of production outperformance from its remaining assets throughout the year, it said.
Crescent Point said it is also decreasing its development capital expenditures guidance for 2023 by approximately $73.9 million (CAD 100 million) reflecting the removal of capital that was expected to be spent on the North Dakota assets following the closing of the transaction.
Crescent Point has acquired $2.22 billion (CAD 3.0 billion) of high-quality assets in the Kaybob Duvernay and Alberta Montney since 2018 that were primarily funded through approximately $2 billion (CAD 2.7 billion) of non-core dispositions. These transactions have enhanced Crescent Point’s long-term per-share metrics and are consistent with its strategy of focusing on high-return assets with significant inventory depth, the company said.
Meanwhile, Crescent Point reported a net income of $156.9 million (CAD 212.3 million) for the second quarter, compared to $245 million (CAD 331.5) million for the prior-year quarter, the company said in an earnings release.
The company said it generated $205.45 million (CAD 278 million) in excess cash flow in the second quarter, supporting its debt reduction and return of capital to shareholders.
Crescent Point’s average production in the second quarter was 155,031 boepd, which included the impact of approximately 7,000 boepd from downtime in the Kaybob Duvernay related to recent Alberta wildfires. Due to the company’s “strong operational execution and production outperformance” from its Kaybob Duvernay asset in the first half of the year, Crescent Point said it was able to maintain its annual average production guidance with its capital expenditures budget remaining unchanged.
“Our second quarter and year-to-date results demonstrate our strategic approach to building our asset portfolio and generating long-term returns for shareholders”, Bryksa said. “Through our recent Alberta Montney acquisition, we have bolstered our portfolio of high-return, scalable drilling locations while enhancing our per-share metrics and return of capital profile. This acquisition also provides us with the opportunity to create additional value for shareholders over time through productivity enhancements, cost efficiencies, and reserves growth.”
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