(May 26, 2015 CALGARY, ALBERTA) - Crescent Point Energy Corp. ("Crescent Point" or the "Company") (TSX and NYSE: CPG) is pleased to announce that it has entered into an arrangement agreement (the "Legacy Arrangement") to acquire all of the issued and outstanding shares of Legacy Oil + Gas Inc. ("Legacy").
Legacy is a publicly-traded, light oil-weighted producer with approximately 22,000 boe/d of high-netback production, of which more than 15,000 boe/d is from conventional and unconventional plays in Crescent Point's core southeast Saskatchewan, Manitoba and North Dakota areas. The assets to be acquired (the "Legacy Assets") include approximately 1,000 net sections of land, of which approximately 525 net sections are in southeast Saskatchewan. The southeast Saskatchewan lands include approximately 200 net sections in the emerging and highly-economic Midale light oil resource play. Total consideration for the Legacy Arrangement is approximately $1.53 billion, comprised of approximately 18.97 million Crescent Point common shares and the assumption of approximately $967 million of net debt, estimated as at the time of closing and inclusive of transaction costs.
"The Legacy acquisition is aligned with our strategy of acquiring large oil-in-place pools with low current recovery factors," said Scott Saxberg, president and CEO of Crescent Point. "This acquisition improves the long-term sustainability of our business model and our dividend not only through financial accretion and a lower payout ratio, but through the addition of a mix of assets with significant growth potential, low-decline rates and waterflood potential.
The low-cost, high-return Midale assets add yet another layer of top-quartile locations to our drilling inventory and provide us with additional operational flexibility."
Assuming the successful completion of the Legacy Arrangement on or about June 30, 2015, Crescent Point is upwardly revising its 2015 guidance for production and capital expenditures. The Company's 2015 average daily production rate is expected to increase by approximately 6.6 percent to 162,500 boe/d from 152,500 boe/d, which is based on average second half 2015 production of approximately 20,000 boe/d from the Legacy Assets. Capital expenditures for the year are expected to increase by $100 million to $1.55 billion. Approximately 65 percent of the incremental capital expenditures is expected to be directed towards drilling and completions, with the remainder used for facilities and land investments. Crescent Point expects to revisit its capital budget during third quarter 2015 based on the Company's continued efforts to improve overall capital costs and efficiencies, as well as its outlook for commodity prices.
In connection with the Legacy Arrangement, Crescent Point has entered into an agreement, on a bought deal basis, with a syndicate of underwriters for an offering of 21,060,000 Crescent Point common shares at $28.50 per share to raise gross proceeds of approximately CDN$600 million (the "Financing"). Crescent Point has also granted the underwriters an over-allotment option to purchase, on the same terms, up to an additional 3,159,000 Crescent Point common shares. This option is exercisable, in whole or in part, by the underwriters at any time until 30 days after closing. The maximum gross proceeds raised under the Financing will be approximately CDN$690 million, should this option be exercised in full. Closing is expected to occur on or about June 16, 2015.
Although the net proceeds of the Financing are expected to be used to reduce indebtedness assumed in connection with the Legacy Arrangement, the Financing is not conditional on the closing of the Legacy Arrangement. The successful completion of the Legacy Arrangement, in combination with the proposed Financing, is expected to be accretive to Crescent Point's per share reserves, production and cash flow on a debt-adjusted basis. Crescent Point's payout ratio is also expected to decrease due to the free cash flow profile of the Legacy Assets. Total debt as a percentage of the overall consideration for the Legacy Arrangement, net of the proposed Financing, represents approximately 25 percent, which is expected to allow the Company to debt-adjust its balance sheet to maintain a neutral net debt to funds flow position at the end of 2015.
Under the terms of the Legacy Arrangement, Crescent Point has agreed to acquire all of the issued and outstanding shares of Legacy at an exchange ratio of 0.095 Crescent Point common shares for each Legacy share. Crescent Point also expects to assume approximately $967 million of net debt, including transaction costs. The Company's aggregate consideration for Legacy is approximately $1.53 billion, based on a 5-day volume weighted average trading price of $29.55 per Crescent Point common share. This exchange ratio represents a premium of 36 percent to Legacy's weighted average trading price in the 10 days prior to the April 17, 2015 announcement of FrontFour Capital Group LLC seeking to nominate three new directors to the Legacy board of directors. The Legacy Assets increase Crescent Point's position in its core area of southeast Saskatchewan and include a significant entry into the emerging Midale resource play. The Midale play is a highly economic, large oil-in-place pool, featuring low recovery to date and future growth potential through horizontal drilling and waterflood implementation. Crescent Point is also acquiring attractive conventional and unconventional assets, including Legacy's Alberta assets, which are free cash flow positive with low decline rates and large oil-in-place.
Crescent Point is one of Canada's largest light and medium oil producers, with an annual dividend of CDN$2.76 per share. Crescent Point shares are traded on the Toronto Stock Exchange and New York Stock Exchange, both under the symbol CPG.
