Crescent Point Energy (CPG) to acquire Shell's Kaybob Duvernay assets in Alberta for $900 million

February 17, 2021 5:03 PM EST

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Crescent Point Energy Corp. ("Crescent Point" or the "Company") (TSX: CPG) (NYSE: CPG) is pleased to announce that it has entered into an agreement (the "Agreement") with Shell Canada Energy ("Shell"), an affiliate of Royal Dutch Shell plc, to acquire Shell's Kaybob Duvernay assets in Alberta (the "Assets") for $900 million (the "Acquisition"). The total consideration consists of $700 million in cash and 50 million common shares of Crescent Point.


  • Strategic entry into a premier and established liquids rich play with greater than 10 years of high-return, low risk drilling inventory.
  • Strengthens expected 2021 excess cash flow generation to approximately $375 to $600 million, at US$50/bbl to US$60/bbl WTI.
  • Pro-forma 2021 guidance production of approximately 134,000 boe/d, primarily comprised of high-margin oil and liquids.
  • Improves netback by over seven percent by lowering royalty rates and reducing per boe operating and G&A expenses.
  • Lowers expected year-end 2021 leverage to approximately 2.3 to 1.6 times adjusted funds flow, at US$50/bbl to US$60/bbl WTI.
  • Enhances ESG profile through Assets with a low standing well count with minimal reclamation and a low emissions intensity.


"We are excited to add the Kaybob Duvernay asset as a strategic core area to our portfolio, as its significant inventory of high-return locations and free cash flow profile provide an attractive and return enhancing opportunity for our shareholders," said Craig Bryksa, President and CEO of Crescent Point. "The Acquisition is aligned with our core principles to focus on strategic initiatives that enhance our balance sheet strength and sustainability. It is expected to enhance our free cash flow generation, leverage ratios and ESG profile. The depth of high-return drilling inventory also provides optionality within our capital allocation framework. We view the Kaybob assets as low-risk given that they have been delineated over the past decade and key infrastructure and market access are already in place."

Key attributes of the acquired Assets include the following:

  • Production of approximately 30,000 boe/d (57% condensate, 8% NGL and 35% shale gas);
  • Core of the condensate rich fairway with attractive reservoir characteristics, including higher pressure and pay thickness;
  • Approximately 500 net sections of contiguous land in the Kaybob area (approximately 325 net sections undeveloped);
  • 98 percent Crown land with limited expiry concerns and a high working interest of approximately 100 percent;
  • Approximately 200 net internally identified drilling locations, based on conservative well spacing of 600 meters, of which only 36 are booked as Proved plus Probable ("2P") in the independent evaluators report prepared by McDaniel & Associates Consultants Ltd. (the "McDaniel Report"). These locations are primarily comprised of two-mile horizontal wells;
  • High quality type wells with strong liquids rates and competitive full-cycle economics;
  • Significant owned and third party infrastructure currently in place, leading to lower expected future capital requirements; and
  • A royalty rate of approximately five percent and expected operating expenses of approximately $7.25 per boe.

Prior to the expected closing of the Acquisition in April 2021, Shell plans to bring a number of drilled and uncompleted wells on stream. As a result, production from the acquired Assets is expected to increase to approximately 35,000 boe/d during second quarter 2021. Crescent Point plans to manage these Assets to target a lower decline rate and longer-term production of approximately 30,000 boe/d. Following the initial period of flush production, the Company's pro-forma decline rate is expected to remain unchanged at approximately 25 percent.

Crescent Point will also seek opportunities to enhance returns over time through potential operational efficiencies and effective knowledge transfer. Crescent Point will combine its significant expertise in multi-well pad development and field technology, including experience gained from other North American resource plays with similar geology, along with the technical expertise provided by the Shell staff that will be joining the Company.


As part of this Agreement, Crescent Point has agreed to acquire the Assets for $900 million. The Acquisition will be funded through a combination of $700 million in cash, accessed through the Company's credit facility, and 50 million Crescent Point common shares. Upon closing, Shell will own approximately 8.6 percent of the outstanding Crescent Point common shares.

With approximately 30,000 boe/d of production and assuming US$50/bbl WTI, the estimated acquisition metrics are as follows:

  • Less than 3.0 times net operating income based on an operating netback of approximately $30 per boe;
  • $30,000 per flowing boe; and
  • $12.87 per boe of 2P reserves of 107.4 MMboe as assigned by the independent evaluator, equating to a recycle ratio of over 2.0 times, including $483 million of undiscounted future development capital.

The acquired Assets are estimated to require approximately $180 million of annual capital to sustain approximately 30,000 boe/d of production, further enhancing the Company's free cash flow generation.

This Acquisition is expected to be accretive on all per share metrics. In particular, in the 12 month period following the closing of the Acquisition, excess cash flow per share is expected to double with adjusted funds flow per share increasing by greater than 25 percent, compared to Crescent Point's pre-acquisition expectations. These accretion metrics improve further on a debt-adjusted basis. In addition, the Company's adjusted funds flow netback is also expected to increase by over seven percent, driven by a lower royalty rate and anticipated per boe operating and general and administrative expense reductions.

The above mentioned transaction metrics and financial accretion are based on a price forecast of US$50/bbl WTI, CDN$2.50/mcf AECO and a US$/CDN $0.78 exchange rate. The effective date of the Acquisition is January 1, 2021.

Scotiabank and BMO Capital Markets acted as financial advisors to Crescent Point on this transaction. The Acquisition is subject to the satisfaction of customary closing conditions, consents and regulatory approvals.


Crescent Point's pro-forma leverage ratio is expected to improve to approximately 2.3 to 1.6 times net debt to adjusted funds flow at the end of 2021, based on US$50/bbl to US$60/bbl WTI.

Upon closing of the Acquisition, Crescent Point's unutilized credit capacity on its current facilities is expected to total approximately $2.0 billion. The Company will continue to prioritize its balance sheet with the allocation of its excess cash flow and will remain active on potential acquisitions and dispositions as part of its focused asset strategy.


Crescent Point's purpose for 'Bringing energy to our world – the right way' highlights the Company's role to produce responsibly developed energy with ESG standards being top of mind.

This Acquisition further bolsters Crescent Point's ESG profile due to the low standing well count and minimal undiscounted uninflated asset retirement obligations of approximately $50 million associated with the Assets. The Liability Management Rating ("LMR") associated with these Assets is 7.9, well above the peer average in Alberta. The Company's corporate emissions intensity is also expected to improve with the addition of the Assets.


Crescent Point's revised annual guidance for 2021, which incorporates the impact of the announced Acquisition for the remainder of the year, assuming the anticipated closing in April 2021, includes annual average production of 132,000 to 136,000 boe/d and development capital expenditures of $575 million to $625 million. The Company's revised budget includes approximately $100 million of development capital expenditures expected to be directed to the newly acquired Kaybob Duvernay assets, with the balance of its program remaining unchanged from prior guidance.

On an annual pro-forma basis, Crescent Point's sustaining development capital expenditures are now expected to be approximately $800 to $850 million to generate annual production that is in-line with, or exceeds, the current 2021 annual guidance range.

The Company's revised 2021 guidance is now expected to generate excess cash flow of approximately $375 million to $600 million, at US$50/bbl to US$60/bbl WTI, providing an increased opportunity to further enhance shareholder value. The Company will have approximately 30 percent of its pro-forma oil and liquids production, net of royalty interest, hedged through the remainder of 2021 upon closing of the Acquisition.


Crescent Point management will host a conference call on Wednesday, February 17, 2021 at 4:00 p.m. MT (6:00 p.m. ET) to discuss the announced Acquisition. A slide deck will accompany the conference call and can be found on Crescent Point's home page.

Participants can listen to this event online via webcast. Alternatively, the conference call can be accessed by dialing 1–888–390–0605.

The webcast will be archived for replay and can be accessed on Crescent Point's conference calls and webcasts webpage under the invest tab. The replay will be available approximately one hour following completion of the call.

Shareholders and investors can also find the Company's most recent investor presentation on Crescent Point's website.


The Company's revised guidance for 2021 is as follows:



Total Annual Average Production (boe/d) (1)

108,000 – 112,000

132,000 – 136,000

Capital Expenditures

Development capital expenditures ($ million)

$475 - $525

$575 - $625

Capitalized G&A ($ million)



Total ($ million) (2)

$508 - $558

$610 - $660

Other Information for 2021 Guidance

Reclamation activities ($ million) (3)



Capital lease payments ($ million)



Annual operating expenses

$560 - $580 million

($14.00 - $14.50/boe)

$625 - $645 million

($12.75 - $13.25/boe)


12.5% - 13.5%

11.5% - 12.5%


The revised total annual average production (boe/d) is comprised of ~87% Oil & NGLs and 13% Natural Gas


Land expenditures and net property acquisitions and dispositions are not included. Revised development capital expenditures is allocated as follows: 87% drilling & development and 13% facilities & seismic


Reflects Crescent Point's portion of its expected total budget

Non-GAAP Financial Measures

Throughout this press release, the Company uses the terms "adjusted funds flow", "adjusted funds flow from operations", "adjusted funds flow from operations per share", "operating netback", "netback", "adjusted funds flow netback", "excess cash flow", "excess cash flow per share", "free cash flow" and "net debt to adjusted funds flow from operations". These terms do not have any standardized meaning as prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other issuers.

Adjusted funds flow is equivalent to adjusted funds flow from operations. Adjusted funds flow from operations is calculated based on cash flow from operating activities before changes in non-cash working capital, transaction costs and decommissioning expenditures funded by the Company. Adjusted funds flow from operations per share is calculated as adjusted funds flow from operations divided by the number of weighted average diluted common shares outstanding. Transaction costs are excluded as they vary based on the Company's acquisition and disposition activity and to ensure that this metric is more comparable between periods. Decommissioning expenditures are discretionary and are excluded as they may vary based on the stage of the Company's assets and operating areas. Management utilizes adjusted funds flow from operations and adjusted funds flow per share as a key measures to assess the ability of the Company to finance dividends, operating activities, capital expenditures and debt repayments. Adjusted funds flow from operations as presented is not intended to represent cash flow from operating activities, net income or loss or other measures of financial performance calculated in accordance with IFRS.

Operating netback is calculated on a per boe basis as oil and gas sales (based on average price received), less royalties, operating and transportation expenses. Netback is equivalent to adjusted funds flow from operations netback. Adjusted funds flow from operations netback is calculated on a per boe basis as operating netback less net purchased products, realized derivative gains and losses, general and administrative expenses, interest on long-term debt, foreign exchange, cash-settled share-based compensation and certain cash items, excluding transaction costs, foreign exchange on US dollar long-term debt and certain non-cash items. Operating netback and adjusted funds flow from operations netback are common metrics used in the oil and gas industry and are used by management to measure operating results on a per boe basis to better analyze performance against prior periods on a comparable basis. Readers are cautioned that reliance on such information may not be appropriate for other purposes.

Excess cash flow is calculated as free cash flow less dividends. Free cash flow is calculated as adjusted funds flow from operations less capital expenditures, payments on lease liability, asset retirement obligations and other cash items (excluding net acquisitions and dispositions). Excess cash flow per share is calculated as excess cash flow divided by the number of weighted average diluted shares outstanding. Management utilizes free cash flow and excess cash flow as key measures to assess the ability of the Company to finance dividends, potential share repurchases, debt repayments and returns-based growth.

Net debt is calculated as long-term debt plus accounts payable and accrued liabilities and long-term compensation liability net of equity derivative contracts, less cash, accounts receivable, prepaids and deposits, long-term investments, excluding the unrealized foreign exchange on translation of US dollar long-term debt. Management utilizes net debt as a key measure to assess the liquidity of the Company.

Net debt to adjusted funds flow from operations is calculated as the period end net debt divided by the sum of adjusted funds flow from operations for the trailing four quarters. The ratio of net debt to adjusted funds flow from operations is used by management to measure the Company's overall debt position and to measure the strength of the Company's balance sheet. Crescent Point monitors this ratio and uses this as a key measure in making decisions regarding financing, capital spending and dividend levels.

Management believes the presentation of the Non-GAAP measures above provide useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.

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