Crescent Point Energy has entered into an arrangement agreement to acquire Hammerhead Energy, an oil and liquids-rich Alberta Montney producer, for total consideration of approximately $2.55 billion, including approximately $455 million in assumed net debt, consisting of cash and common shares of the Company.

“This strategic consolidation is an integral part of our overall portfolio transformation,” said Craig Bryksa, President and CEO of Crescent Point. “The acquired assets, which are situated in the volatile oil window in the Alberta Montney and adjacent to our existing lands, provide significant value with premium drilling inventory, infrastructure ownership and scalable market access. This transaction is expected to be immediately accretive to our per share metrics and to enhance our return of capital profile for shareholders. Upon completion of the transaction, Crescent Point will have a dominant position in both the Alberta Montney and Kaybob Duvernay plays, which are complemented by our low-decline, long-cycle assets in Saskatchewan. Moving forward, our strategic priorities will focus on continued operational execution, balance sheet strength and increasing our return of capital to shareholders.”

KEY HIGHLIGHTS

• Transforms Company into a Montney and Kaybob Duvernay focused E&P with complementary long-cycle assets in Saskatchewan. 
• Adds approximately 800 net Montney drilling locations and increases estimated total corporate premium inventory to over 20 years.
• Accretive to 2024 metrics and enhances excess cash flow per share by over 15 percent, on average, throughout the five-year plan. 
• Creates the seventh-largest Canadian E&P by production volume and largest land owner in the Alberta Montney’s volatile oil fairway.
• Plan to increase base dividend by 15 percent to $0.46 per share on an annual basis, subject to closing of the Transaction.
• Leverage ratio of 1.1 times net debt to adjusted funds flow expected at year-end 2024 at US$80/bbl WTI.

STRATEGIC RATIONALE

Establishes Dominant Position in the Alberta Montney with 350,000 Net Acres of Contiguous Land Providing Synergies: The Transaction is accretive to Crescent Point’s portfolio and allows the Company to consolidate approximately 105,000 net acres of land with Montney rights, directly adjacent to its existing Alberta Montney position at Gold Creek and Karr. The acquired assets are highly attractive with favourable royalty rates on Crown lands and include a high working interest rate of primarily 100 percent with limited expiry concerns. The acquired lands also have attractive geological characteristics with significant net pay, similar to Crescent Point’s Gold Creek assets, and higher than normal pressure. The Company expects to be able to drive significant operational synergies across the combined asset base with respect to drilling and completion design, shared infrastructure, well-pad development continuity and supply chain management efficiencies.

Increases Premium Drilling Inventory to Over 20 Years: Adds approximately 800 net Montney drilling locations, further bolstering Crescent Point’s short-cycle asset portfolio. This Transaction provides decades of inventory with highly attractive returns, capital efficiencies and finding and development costs, which all rank in the top quartile within the Company’s portfolio. Crescent Point’s inventory of premium drilling locations is estimated to exceed 20 years on a pro forma basis, providing an attractive growth profile.

Significant Infrastructure Ownership and Market Access: Enhances the Company’s ownership of significant infrastructure within the Alberta Montney, including oil batteries, compressors, water disposal and gathering lines to third party processing plants. Cumulative capital investment made by Hammerhead on major infrastructure since inception is expected to total approximately $500 million by the end of 2023. This infrastructure will support the acquired assets as they grow from approximately 56,000 boe/d (50% oil and liquids) expected in 2024 to over an estimated 80,000 boe/d within Crescent Point’s five-year business plan. Crescent Point also expects to benefit from long-term contracts already in place to ensure the Company has adequate market access for future scalability.

Expected Accretion of Over 15 Percent Per-Share to Excess Cash Flow and Return of Capital: The Transaction is expected to be accretive to Crescent Point’s 2024 metrics, including adjusted funds flow and excess cash flow per share. Over the Company’s five-year business plan, the Transaction is expected to further strengthen Crescent Point’s excess cash flow and return of capital profile by over 15 percent per share, on average, in addition to its current outlook for mid-single digit organic growth. Crescent Point expects to generate significant financial and operational synergies in the near-term through lower general and administrative expenses and capital costs. The Company will focus on realizing additional value over time, including the efficient development of the acquired assets by optimizing the number of wells drilled per section. The Transaction also provides Crescent Point with an estimated $1.3 billion of tax pools.

Creates Seventh-Largest E&P in Canada by Production Volume (Weighted 65% to Oil and Liquids): Pro-forma production is expected to total over 200,000 boe/d, with significant drilling inventory in place to deliver additional long-term organic growth. Crescent Point is expected to immediately become the largest owner of land in the Alberta Montney’s volatile oil fairway, in addition to already controlling the largest amount of land in the condensate-rich Kaybob Duvernay play. This increased scale is expected to allow the Company to continue to improve its cost of capital.

UPDATED PRELIMINARY 2024 GUIDANCE

Crescent Point’s revised 2024 preliminary guidance, which incorporates the Transaction, includes estimated annual production of 200,000 to 208,000 boe/d (65% oil and liquids) based on development capital expenditures of $1.45 to $1.55 billion. This budget is expected to generate over $1.2 billion of excess cash flow at US$80/bbl WTI.

Approximately 80 percent of Crescent Point's 2024 budget is expected to be allocated to its Alberta Montney and Kaybob Duvernay plays, with the remaining capital allocated to the Company's low-decline, long-cycle assets in Saskatchewan.

The revised capital expenditures budget incorporates approximately $400 million of development capital associated with the newly acquired assets, which are forecast to grow from approximately 56,000 boe/d in 2024 to approximately 80,000 boe/d within the Company’s five-year business plan. In addition to this long-term growth, capital expenditures for the acquired assets are expected to moderate subsequent to 2024, resulting in significant excess cash flow generation.

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