Crescent Point Energy has entered into an agreement with Spartan Delta to acquire Spartan’s oil and liquids-rich Montney assets in Alberta for $1.7 billion in cash.

“Over the past five years, we have fundamentally rebuilt and strengthened Crescent Point,” said Craig Bryksa, President and CEO of Crescent Point. “As a result of our efforts, and after closing this transaction, our asset base will include significant inventory depth in both the Kaybob Duvernay and the Montney, while also maintaining significant low-decline assets in Saskatchewan that provide additional excess cash flow. The Montney acquisition is immediately accretive to our per share metrics, enhances our return of capital to shareholders, and is aligned with our long-term strategy to focus on high quality, scalable resource plays that meet our defined asset criteria. These assets include over 20 years of drilling locations and increase our total corporate inventory of premium locations to 15 years. The acquired lands are also situated in the volatile oil fairway with similar resource characteristics to our adjacent Kaybob Duvernay play, where we have demonstrated significant operational excellence.”

Key highlights

• Acquisition adds 600 Montney locations in Alberta, or over 20 years of premium drilling inventory.
• Immediately accretive to excess cash flow per share by 20 percent, resulting in a higher return of capital for shareholders.
• Maintaining commitment to return approximately 60 percent of excess cash flow to shareholders, including the base dividend.
• Pro-forma leverage ratio of 1.3 times adjusted funds flow at closing and 1.0 times at year-end 2023.
• Targeting additional non-core asset dispositions over time to further optimize portfolio.

Key attributes of the acquired assets include the following:

• Approximately 38,000 boe/d (55% oil and liquids) with attractive netbacks generating significant excess cash flow;
• Total drilling inventory of 600 net Montney locations, providing over 20 years of inventory to sustain current production levels;
• Approximately 235,000 net acres of contiguous land with Montney rights in Alberta within the Gold Creek and Karr area;
• Consolidated land base that is primarily Crown with a high average working interest of 96 percent;
• Situated in the volatile oil fairway with attractive reservoir characteristics, including pay thickness and permeability;
• Key infrastructure and well licenses in place to support future development plans;
• Adjacent to Crescent Point’s Kaybob Duvernay assets, providing opportunity for operational efficiencies;
• $1.7 billion of tax pools to further enhance long-term excess cash flow generation; and
• Low Scope 1 emissions intensity of less than 0.01 tCO2e/boe.

Type wells for the acquired assets are expected to payout in approximately 10 months from the initial on-stream date, based on wells booked by the independent engineers and assuming current commodity prices. These wells are also economic at low commodity prices with break-evens below US$40/bbl WTI. Returns and economics from these wells rank in the top quartile within the Company’s portfolio, along with the Kaybob Duvernay asset, providing additional flexibility within its capital allocation framework. Crescent Point will seek to further enhance these returns over time, as it has done when entering other resource plays.

Upon closing, the Company's pro-forma decline rate is expected to remain below 30 percent. Crescent Point plans to manage the acquired Montney assets in a disciplined manner, maintaining a conservative production profile and targeting a low decline rate to maximize long-term excess cash flow generation and return of capital for shareholders.

Pro-forma this Acquisition, the Company’s total inventory of premium locations will increase to 15 years, based on the long-term development plans for its assets.

The Transaction is anticipated to close during second quarter 2023, subject to regulatory approvals and customary closing conditions.

Updated 2023 guidance and five-year outlook

Crescent Point’s revised 2023 annual guidance, which incorporates the impact of the Acquisition following the closing date, includes annual average production of 160,000 to 166,000 boe/d and development capital expenditures of $1.15 to $1.25 billion. This budget, including the base dividend, continues to be fully funded at approximately US$50/bbl WTI for the remainder of the year.

The revised 2023 capital expenditures budget incorporates approximately $150 million of development capital expenditures associated with the newly acquired assets. Crescent Point plans to manage the Montney assets by drilling approximately 25 wells per year, which requires approximately $250 million of annual capital expenditures, inclusive of facilities and infrastructure spending.

The Company’s production forecast in its five-year plan is now expected to grow to 195,000 boe/d by 2027. This forecast is expected to generate approximately $3.6 billion to $5.2 billion of cumulative excess cash flow ($6.53 to $9.57 per share), at US$65/bbl to US$75/bbl WTI, representing an increase of approximately 20 percent in comparison to its prior outlook. Crescent Point’s Kaybob Duvernay and Montney assets are expected to represent approximately 45 percent of the Company’s pro-forma total production at closing and increasing to approximately 60 percent within its five-year plan. This plan remains disciplined with a continued focus on returns and long-term sustainability.

KeyFacts Energy: Crescent Point Energy Canada country profile