Brian Zinchuk is editor and owner of Pipeline Online
Crescent Point drilling in the Torquay play in 2018. That year, up to 9 rigs were working in an area not much larger than a township. These days, the company doesn’t even have one rig working in the area. Photo by Brian Zinchuk
CALGARY – It wasn’t that long ago that the vast majority of Crescent Point’s capital spending took place in Saskatchewan. But those days are long gone, as the company projects 70 per cent of its future capital spending will be in Alberta’s Duvernay and Montney plays.
On Sept. 11, Crescent Point announced its budget for 2024 as well as it’s five-year outlook, and one thing is clear: the company which used to spend nearly all of its budget in Saskatchewan is now spending most of it in Alberta, and will continue to do so.
The company is also aiming in five years to return to production levels it had six years ago, when much of its focus was in Saskatchewan.
The company’s projected annual production of 145,000 to 151,000 boepd in 2024 is based on development capital expenditures of $1.05 to $1.15 billion. However, Crescent Point is targeting production of approximately 180,000 boepd by 2028 under its updated five-year plan, which equates to a compounded annual growth rate of five percent. This growth is expected to be driven from each of the company’s Kaybob Duvernay and Alberta Montney assets, which are expected to generate over 70 percent of Crescent Point’s total production by 2028, the company said in its release.
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If that 180,000 boepd sounds familiar, that’s because it is. “In 2017, Crescent Point plans to drill approximately 670 net wells and generate annual average production of 172,000 boepd with an exit rate of 183,000 boepd,” the company said on Feb. 23, 2017. But high debt, combined with the extended oil downturn and low oil prices, led Crescent Point to sell off roughly one third of its production. This included the Uinta play, followed by most of its conventional oil in southeast Saskatchewan, then similar sales in west central Saskatchewan. In recent weeks, the company sold off its North Dakota Bakken assets, much of which was not far across the U.S. border from its Torquay play.
Scott Saxberg, accepting the 2011 Saskatchewan Oilman of the Year award. Photo by Brian Zinchuk
Different CEO, different focus
Perhaps one of the largest changes was the replacement of Scott Saxberg as CEO in the spring of 2018. The co-founder of Crescent Point had named the company after the location of his family’s cabin. While CEO he “completed 34 corporate transactions and 500 acquisitions, ranging from $2 million to over $1 billion,” according to Saxberg’s LinkedIn page. A high number of those were within Saskatchewan, and unquestionably, Saskatchewan had been Saxberg’s focus. The engineer spent his early career working with Wascana Energy, and was named Saskatchewan Oilman of the Year in 2011.
Even several years into the oil downturn, Crescent Point under Saxberg led the country in drilling by a wide margin, at a time when it would spend most of its cashflow on capital expenditures. The company often employed more than 20 drilling rigs in Canada, typically with all but one of those working in Saskatchewan. On Feb. 14, 2018, Crescent Point had 29 rigs working in Canada, of which 27 were in Saskatchewan. According to RiggerTalk.com, on Sept. 11, 2023, Crescent Point had four drilling rigs working in Saskatchewan. Three were in the Viewfield area, one in the Shaunavon play, and none in the Torquay play.
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Shift to Alberta focus
But under the leadership of Craig Bryksa, a long-time engineer with Crescent Point who replaced Saxberg as CEO, there has been a definitive change in focus to Alberta, as well as to returns to shareholders. As Saxberg had bought up almost anything he could in southeast Saskatchewan over the years, Bryksa’s debt-reduction strategy sold much of that off, keeping the Viewfield Bakken and Torquay plays. In February, 2021, Crescent Point made a transformative deal, picking up Shell Canada’s Kaybob Duvernay assets for total consideration of $900 million.
The company also picked up liquid-rich Montney properties from Spartan Delta. Corp. this past spring for $1.7 billion. It was a whopper for Crescent Point. According to BlincSoftware’s monthly Top 10 well reports for Alberta, in July Crescent Point had six of the top ten conventional wells, including all of the top five. All were on former Spartan Delta properties, according to BlincSoftware.
BlincSoftware
Those top wells were producing 1,303 bpd, 1,188 bpd, 1,134 bpd 1,098 bpd, 872 bpd and 806 bpd, all much higher than the best producing conventional wells in Saskatchewan.
As such, Crescent Point said it is increasing the proportion of capital allocated to Kaybob Duvernay and Alberta Montney, which represent 70 percent of the company’s 2024 budget.
It anticipates “Generating significant excess cash flow of over $1.0 billion in 2024 at US$80/bbl WTI.” Enhancing balance sheet strength with expected net debt of $1.7 billion, or 0.7 times funds flow, at year-end 2024.
“Throughout 2023, our strong results and outperformance have demonstrated the benefits of our improved asset base alongside our ongoing operational execution,” said Craig Bryksa, president and CEO, in a release. “This inflection we are seeing in our business is a direct result of our strategy, which is focused on maintaining a resilient portfolio of high-return short- and long-cycle assets. Our disciplined approach is expected to generate sustainable returns and significant excess cash flow for shareholders.”
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Preliminary 2024 budget
Based on its initial budgeting process and the current commodity price outlook, Crescent Point said it expects to generate annual average production of 145,000 to 151,000 boepd in 2024 with development capital expenditures of $1.05 to $1.15 billion. This preliminary production and development capital expenditures guidance incorporates the impact of the company’s recently announced disposition of its North Dakota assets, which is expected to close in fourth quarter 2023.
Approximately 70 percent of Crescent Point’s 2024 budget is expected to be allocated to its Kaybob Duvernay and Alberta Montney plays, which provide the Company with top quartile returns, scalability and quick well payouts. Year-over-year production from these Alberta assets is expected to grow by approximately 10 percent by the end of 2024, with continued growth reflected in Crescent Point’s five-year plan.
The remaining capital budget will be allocated to the company’s long-cycle assets in Saskatchewan. This area provides Crescent Point with a combination of high-return locations and low-decline production that generates significant excess cash flow, the company said.
The company’s 2024 preliminary budget includes allocating approximately three to five percent of its spending to environmental stewardship projects, consistent with its capital allocation framework.
Crescent Point expects to generate significant excess cash flow of over $1.0 billion at US$80/bbl WTI under its preliminary 2024 budget. As part of the company’s return of capital framework, approximately 60 percent of excess cash flow is expected to be returned to shareholders through dividends and share repurchases. Crescent Point’s net debt is expected to total approximately $1.7 billion, or 0.7 times adjusted funds flow, at year-end 2024.
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