(Daily Oil Bulletin) Calgary– In a major shift in corporate strategy, Crescent Point Energy Corp. has cut its monthly dividend on Aug. 1 to 10 cents from 23 cents and reduced its capital budget by $100 million to $1.45 billion.
While most producers’ reduced budgets are far below their original projections, Crescent Point’s revised total equals its original 2015 budget of $1.45 billion.
Powered by acquisitions, Crescent Point increased production in the second quarter but reported a $240 million net loss. The company reported derivative losses of $246.25 million for the quarter compared with derivative losses of $154.15 million in the same period last year.
Crescent Point reported net debt of 1.9 times funds flow from operations at the end of quarter and unused credit capacity of $1.7 billion.
The company said the revised budget announced with its second quarter results on Aug. 12 reflects cost savings and less drilling-related capital. Production guidance remains unchanged at 163,500 boepd.
Besides cutting its monthly dividend to 10 cents a share from 23 cents, Crescent Point is suspending its existing share dividend plan (SDP) and dividend reinvestment plan (DRIP), effective with the August dividend. As of Sept. 15, shareholders who were enrolled in the SDP or DRIP will receive the regular monthly cash dividend of 10 cents a share.
The reduced dividend is effective with the August dividend which is payable in cash on Sept. 15.
Crescent Point president Scott Saxberg said these measures — cutting the dividend, cutting the capital budget and suspending the dividend reinvestment plans — protect the company’s balance sheet amid extremely low prices and highlights the goal of internal funding rather than increasing debt or issuing equity.
The cuts in the capital budget have been evident as the company, which had been leading the country in the number of active drilling rigs it employed steadily dropped in recent months. On June 11, the company had 24 drilling rigs going. By July 10 it dropped. As of Aug. 13, it was down to 11.
Second quarter review
Crescent Point said its second quarter production increase was driven by its development program, ongoing waterflood success and strong results from its cemented liner completion techniques.
Bakken
During quarter Crescent Point drilled 35 (32.9 net) oil wells in the Viewfield Bakken play.
In the first half of 2015, the company successfully converted 11 producing wells to water injection wells, with a total of 30 planned for the year. Crescent Point continues to advance its waterflood program and is currently working on unitizing its second of four units in the play.
Based on results to date, the company estimates it has reduced decline rates by up to 10 per cent in waterflood-affected areas in the Viewfield Bakken resource play, compared to areas not under waterflood.
Crescent Point is encouraged by its new closable sliding sleeve technology, which was used on 22 net wells in the quarter and is currently being deployed in all cemented liner completions in the play. Since 2014, Crescent Point has cut drilling and completion costs in the Viewfield Bakken by 22 per cent and continues to seek service cost reductions and to improve overall efficiencies.
Torquay
The company is pleased with drilling results to date in the Torquay play at Flat Lake, having drilled nine (nine net) oil wells during the quarter, including two (two net) step-out wells.
This year Crescent Point has drilled seven (seven net) step-out wells in the Torquay, extending the boundary of the play. The company continues to modify and experiment with various fracture stimulation techniques, which have the potential to further increase the economics of wells drilled in the play.
Midale
The Midale unconventional light oil resource play is a highly economic, large oil-in-place pool with a low recovery factor to date and is in the early stages of horizontal well development.
Crescent Point significantly increased its position in this play with its acquisition of Legacy Oil + Gas Inc., which closed on June 30.
The acquirer said its infrastructure in the Midale area allows it to realize the associated gas and NGL produced from the play. In the first half of 2015, Crescent Point and Legacy drilled 15 (15 net) oil wells in the Midale play.
Crescent Point has plans to drill 22 (21 net) Midale oil wells in the second half of 2015. The company has more than 400 internally identified drilling locations in the play, of which 38 net are booked as probable locations and 67 net are booked as proved locations.
Southwest
Saskatchewan
Crescent Point continued to expand and optimize its waterflood program in the Shaunavon resource play during the second quarter, with a total of 52 water injection wells operating in the play. During the first half of 2015, the company converted 11 producing wells to water injection wells, which represents about 30 per cent of planned conversions for 2015.
Based on results to date, Crescent Point estimates it has reduced decline rates by more than 10 per cent in waterflood-affected areas in the play, compared to areas not under waterflood.
Alberta and west-central Saskatchewan
During the quarter, Crescent Point continued its drilling program in the Dodsland area of the Saskatchewan Viking resource play, drilling 48 (47.5 net) oil wells and achieving a 100 per cent success rate. The company is pleased with production results to date, as wells have been coming on production at, or better than, internally forecasted rates.
Crescent Point has begun to implement its sliding sleeve technology in the Viking play, and continues to refine its completion technology. Since 2014, it has cut drilling and completion costs in the Saskatchewan Viking play by about 24 per cent.
The company expanded the waterflood program in the Swan Hills Beaverhill Lake play in second quarter 2015, with a total of five water injection wells currently in operation, including its own operated well and four non-operated injection wells currently operated by Coral Hill Energy Ltd. (On July 2, Crescent Point announced its planned acquisition of Coral Hill, which was expected to close around Aug. 14.)
Crescent Point continues to see a strong waterflood response and is encouraged with results to date. The company plans to advance its waterflood program in the Swan Hills Beaverhill Lake play during the second half of 2015, after integrating the Coral Hill assets.
United States
In the second quarter Crescent Point took part in the drilling of 25 (16.4 net) oil wells in the Uinta Basin, achieving a 100 per cent success rate.
The company remains excited about future opportunity in the Uinta Basin, which is a multi-zone, stacked play in the early stages of horizontal development.
Last year, Crescent Point drilled two horizontal wells targeting the Uteland Butte and Douglas Creek zones, followed by four additional horizontal wells during 2015 targeting the Wasatch, Douglas Creek, Black Shale and Castle Peak zones. The company is encouraged with drilling results to date.
During the quarter, Crescent Point successfully reduced drilling time on its second Douglas Creek horizontal well from 24 days to 16 days, reducing drilling and completion costs. Since 2014, the company has decreased drilling and completion costs in the Uinta Basin by 20 per cent.
Crescent Point is in the initial stages of interpreting data from its operated 3D seismic program, covering about 140 square miles, primarily in the Randlett area. The data will help identify prospective locations for future horizontal and vertical drilling, and will help with the overall development of its operated lands.
During second quarter, the company also participated in the drilling of 6 (4.1 net) oil wells in North Dakota, targeting both the Bakken and Three Forks formations. Crescent Point is encouraged with results to date in both formations and is making significant progress in lowering overall drilling and completion costs.
Hedging
As of Aug. 5, Crescent Point had hedged 54 per cent of its oil production, net of royalty interest, for the remainder of 2015 at a weighted average price of about $88 a bbl and 32 per cent for 2016 at a weighted average price of about $83 a bbl. The company’s oil and gas hedges extend into 2018.
