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Message: Crescent Point increases guidance for 2012
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Press release from CNW Group
Crescent Point Announces Strategic Shaunavon Consolidation Acquisition of Wild Stream Exploration, Expansion of Beaverhill Lake Land Position and Upwardly Revised 2012 Guidance
Wednesday, January 25, 2012
/NOT FOR DISTRIBUTION TO THE U.S. NEWSWIRE OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Jan. 24, 2012 /CNW/ - Crescent Point Energy Corp. ("Crescent Point" or the "Company") (TSX: CPG) is pleased to announce that it has entered into an arrangement agreement (the "Wild Stream Arrangement") with Wild Stream Exploration Inc. ("Wild Stream"). Wild Stream is a publicly traded and 90 percent oil-weighted company with production of approximately 6,400 boe/d. Under the terms of the Wild Stream Arrangement, Crescent Point expects to acquire approximately 5,400 boe/d of Wild Stream's production, 91 percent of which is contiguous with Crescent Point's assets in the Shaunavon and Battrum/Cantuar areas of southwest Saskatchewan. The balance of Wild Stream's production will be transferred into a new junior exploration company ("Newco") in which Crescent Point will hold 2.65 million shares.
Assuming the successful completion of the Wild Stream Arrangement, Crescent Point's average daily production in 2012 is expected to increase to 83,500 boe/d from 80,000 boe/d and its 2012 exit production rate is expected to increase to more than 90,000 boe/d from 85,000 boe/d. In the Shaunavon resource play, the Company expects to have combined production of greater than 15,000 boe/d and more than 800 net sections of land, which include more than 200 net sections expected to be acquired in the Wild Stream Arrangement.
The Company also announces that it has expanded its land position in the Beaverhill Lake light oil resource play in northwest Alberta by more than 100 net sections through a series of acquisitions and Crown land sales, including 15 net sections expected to be acquired in the Wild Stream Arrangement.
WILD STREAM ARRANGEMENT
Under the terms of the Wild Stream Arrangement, Crescent Point has agreed to acquire all of the issued and outstanding shares of Wild Stream at an exchange ratio of 0.17 of a Crescent Point share for each Wild Stream share. In addition, Crescent Point expects to assume approximately $50.8 million of Wild Stream net debt, including deal costs and after taking into account proceeds from stock options and warrants expected to be exercised. The Company's aggregate consideration for Wild Stream is approximately $610.9 million, based on a five-day weighted average trading price of $45.62 per Crescent Point share.
As part of the Wild Stream Arrangement, Wild Stream will move certain of its assets in the Dodsland area into Newco and assume debt of $43.5 million, for a Newco net asset value of approximately $120.4 million, or $1.61 per share.
The total value of the combined entity is $9.37 per share, using Crescent Point's five-day weighted average trading price of $45.62 per share and assuming a Newco net asset value of $1.61 per share. This represents a three percent premium to Wild Stream's five-day weighted average trading price. The successful closing of the Wild Stream Arrangement is expected to provide Wild Stream shareholders with continued exposure to the Shaunavon resource play and Crescent Point's other core resource plays, its anticipated monthly dividend and exposure to the upside in Newco's Dodsland assets.
The Wild Stream Arrangement is expected to close on or before March 15, 2012, allowing Wild Stream shareholders to receive Crescent Point's anticipated March dividend, which is expected to be paid on or about April 16, 2012.
Key attributes of the Wild Stream assets to be acquired:
- Current production of approximately 5,400 boe/d, of which approximately 4,900 boe/d is from the Shaunavon and Battrum/Cantuar areas and 90 percent of which is oil weighted;
- More than 200 net sections of land in the Shaunavon resource play;
- 15 net sections of land in the emerging Beaverhill Lake light oil resource play in the Swan Hills area;
- 37 net sections of land in the Battrum/Cantuar area of southwest Saskatchewan;
- More than 240 net internally identified low-risk drilling locations, including more than 190 net locations in the Shaunavon resource play; and
- Tax pools estimated at $350 million.
Reserves Summary
Independent engineers have assigned reserves utilizing NI 51-101 reserve definitions and effective December 31, 2011, as follows:
- Approximately 28.7 million boe of proved plus probable and 17.6 million boe of proved reserves; and
- Reserve life index of 14.6 years proved plus probable and 8.9 years proved.
ACQUISITION METRICS
Based on the above expectations for the Wild Stream Arrangement, and after adjusting for estimated land and seismic value of $18 million, the estimated acquisition metrics for the assets expected to be acquired, excluding the assets expected to be transferred to Newco, are as follows:
-
2012 Cash Flow Multiple:
- 6.9 times based on production of 5,400 boe/d (US$95.00/bbl WTI, Cdn$3.25/mcf AECO and US$/CDN$0.96 exchange rate)
-
Production:
- $109,800 per producing boe based on 5,400 boe/d
-
Reserves:
- $20.66 per proved plus probable boe
- $33.69 per proved boe
The Wild Stream Arrangement is expected to be accretive to Crescent Point on a per share reserves, production and cash flow basis.
BEAVERHILL LAKE TRANSACTIONS
In addition, the Company has expanded its land position in the Beaverhill Lake light oil resource play in Alberta through a series of acquisitions and Crown land sales (the "Beaverhill Lake Transactions"). During the last six months, Crescent Point has acquired more than 85 net sections of land in the play, the majority of which are undeveloped, for aggregate consideration of approximately $38 million of cash.
The Wild Stream Arrangement includes approximately 15 net sections of land in the Beaverhill Lake play. This land is adjacent to, and contiguous with, existing Crescent Point properties, and is in addition to the more than 85 net sections of land acquired in the Beaverhill Lake Transactions.
In total, and assuming the successful completion of the Wild Stream Arrangement, the Company will have more than 280 net sections of land in the emerging Beaverhill Lake play, of which 271 net sections are undeveloped.
Under the terms of the joint venture and farm-in agreement with Second Wave Petroleum Inc. in respect of certain lands in the Swan Hills and Judy Creek areas, Crescent Point expects to take over operatorship on these lands in the second quarter of 2012.
STRATEGIC RATIONALE
The successful completion of the Wild Stream Arrangement is expected to further solidify Crescent Point's position as the largest player in the Shaunavon resource play in southwest Saskatchewan, in terms of production and land. Upon the successful completion of the Wild Stream Arrangement, Crescent Point expects to have production of greater than 15,000 boe/d and more than 800 net sections of land in the Shaunavon resource play. The Company expects to drill 91 net wells in the Shaunavon resource play in 2012.
Wild Stream's assets will also complement Crescent Point's existing position in Alberta's emerging Beaverhill Lake light oil resource play in the Swan Hills area.
The successful closing of the Wild Stream Arrangement is expected to provide Wild Stream shareholders with continued exposure to the Shaunavon resource play and Crescent Point's other core resource plays, its anticipated monthly dividend and exposure to the upside in Newco's Dodsland assets.
Assets acquired in the Beaverhill Lake Transactions are expected to consolidate the Company's land holdings in the Swan Hills area of Alberta and provide for further expansion of the emerging light oil resource play.
UPWARDLY REVISED 2012 GUIDANCE
Crescent Point continues to execute its business plan of creating sustainable value-added growth in reserves, production and cash flow through management's integrated strategy of acquiring, exploiting and developing high-quality, long-life light and medium oil and natural gas properties in United States and Canada.
As a result of the Wild Stream Arrangement and the Beaverhill Lake Transactions, which are consistent with Crescent Point's strategy of consolidating core resource plays, Crescent Point is upwardly revising its 2012 capital expenditure plans and guidance.
Capital expenditures are expected to increase by $50 million to $1.15 billion, with $42 million of the increase expected to be allocated to the Shaunavon play and the remainder to the Beaverhill Lake resource play. In the Shaunavon resource play, the capital expenditures increase is expected to provide for the drilling of an incremental 19 net wells, bringing the total expected for the year to 91 net wells.
Crescent Point's average daily production in 2012 is expected to increase to 83,500 boe/d from 80,000 boe/d and its 2012 exit production rate is expected to increase to more than 90,000 boe/d from 85,000 boe/d.
Funds flow from operations for 2012 is expected to be approximately $1.44 billion, with a payout ratio of 59 percent, based on forecast pricing of US$95 per barrel WTI, Cdn$3.25 per mcf AECO gas and a US$/Cdn$0.96 exchange rate.
Crescent Point's balance sheet remains strong, with projected average net debt to 12-month cash flow of less than 1.0 times.
The Company continues to implement its balanced 3½-year price risk management program, using a combination of swaps, collars and purchased put options with investment grade counterparties. As at January 23, 2012, the Company had hedged 56 percent, 44 percent, 25 percent and 10 percent of production, net of royalty interest, for 2012, 2013, 2014 and the first half of 2015, respectively. Average quarterly hedge prices range from Cdn$91 per boe to Cdn$98 per boe.
The Company's upwardly revised guidance for 2012 is as follows:
| Production Oil and NGL (bbls/d) Natural gas (mcf/d) |
Prior 72,250 46,500 |
Revised 75,500 48,000 |
| Total (boe/d) | 80,000 | 83,500 |
| Exit (boe/d) | 85,000 | 90,000 |
| Funds flow from operations ($000) Funds flow per share - diluted ($) Cash dividends per share ($) |
1,380,000 4.63 2.76 |
1,440,000 4.67 2.76 |
| Capital expenditures ($000) (1) Wells drilled, net |
1,100,000 347 |
1,150,000 367 |
| Pricing Crude oil - WTI (US$/bbl) Crude oil - WTI (Cdn$/bbl) Natural gas - Corporate (Cdn$/mcf) Exchange rate (US$/Cdn$) |
95.00 98.96 3.25 0.96 |
95.00 98.96 3.25 0.96 |
(1) The projection of capital expenditures excludes acquisitions, which are separately considered and evaluated.
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