Crescent Point Energy (CPG, Financial) recently established a new production record of over 140,000 BOEs per day and concluded the year with an excellent production of over 155,000 BOEs per day. It also expanded the production per share by about 8% during 2013, growth of over 20,000 BOEs per day.
Improving its fundamental position
Crescent enhanced its syndicated bank line by approximately 40% to a net of CAD3.6 billion of credit capability following the year conclusion. This notable enhancement of credit capacitiy gives the company extra working options, and is exceedingly crucial in this declining oil price scenario.
The solid production results for the fiscal year 2014, in addition to a robust financial position of Crescent, is believed to uniquely position the company on the path of superior future growth.
Crescent has strategically hedged 56% of its oil production for 2015, at an average cost of about CAD89 per barrel, and approximately 33% of its production hedged for 2016. It enhanced proved plus probable or 2P reserves by nearly 22% to 807 million BOEs by year conclusion, representing 7% for 2P reserves on a per share basis. Post exclusion of the proceeds gained from the acquisitions, Crescent delivered 97 million BOEs of 2P sophisticated and technical reserves, most of which are located in its key Uinta Basin, Bakken, Torquay and Shaunavon reserves plays.
Crescent is focused on partnering with its key vendors to lower costs considering the ongoing low oil price scenario. Apart from cost savings, Crescent is also focused on improving upon its own efficiencies.
The planned hedging of the oil productions for the fiscal years 2015 and 2016 is believed to be further supported by Crescent’s ongoing efforts to develop partnerships with major vendors to lower the cost and enhance efficiency.
Growth areas
Crescent is aiming to continuously develop many regions with huge expansion potential. In the Torquay play at Flat Lake, Crescent is integrating the key billion barrel oil pool and is gaining continued traction from its step-out wells with the continued delineation of the play. Moreover, Crescent doubled its reserves in this key area for this year.
At present, Crescent is focused on beginning its operated horizontal drilling schedule in Uinta Basin resource play, focusing on innovative zones like the Douglas Creek. Since horizontal drilling in the basin is estimated to be in its early stages of development and thus Crescent is hugely positive regarding the growth outlook of the Uinta Basin.
The significant exploration activities executed by Crescent in 2015 including, the solid growth at the Torquay play and planned drilling program at the Uinta Basin resource play, the Douglas Creek is believed to grow the company’s overall production and thus benefit the key stakeholders.
In its Shaunavon and Viewfield Bakken resource plays, Crescent is quite excited about leveraging a closed sliding sleeve throughout the fracking process. The closed sleeve is believed to have a significant potential to enhance the productivity and efficiency of its waterfloods owing to enhanced control over water displacement, which is expected to accelerate the recovery process. Crescent also has significant potential to reduce capital expenditures by lowering the frequency of well cleanouts due to the proppant flowing back into the well.
In the fourth quarter, Crescent registered robust production of approximately 153,800 BOEs a day allowed by the ongoing success of its drilling schedule throughout its asset base and the continued success of its cemented liner and waterfloods conclusion methods.
The new drilling techniques employed at the Viewfield Bakken and Shaunavon resource plays are forecasted to significantly increase the production at the key wells, and therefore benefit the investors.
Executing in key areas
Crescent is successfully executing its Cantuar and Battrum drilling programs. After assuming the complete operatorship of the Cantuar unit on September 1, Crescent enhanced the production at Cantuar by about 26%. Both these key assets are believed to deliver robust free cash flows. Crescent operated its drilling schedule in the Dodsland region in the Saskatchewan Viking play and drilled nearly 19 total oil wells in the quarter.
The successful drilling programs at Battrum and Cantuar are believed to add significant top line growth for Crescent and benefit the drilling major in the tough oil pricing environment.
Crescent is targeting the key deals in the DJ Basin, which is a light oil play in Colorado. However, it is extremely focused on its operations at the core Utah, North Dakota, Viking, Bakken and Shaunavon regions.
The oil and gas drilling company partially offset the sharp decline in the oil prices that has badly affected several of its peers, recording a 7% increase in the operating cash flows during the fourth quarter and expanding oil and gas production by about 21% in the period, somewhat exceeding analyst estimates.
The major deal closures executed by Crescent during the quarter are forecasted to expand the company’s already robust resource base, enabling Crescent to deliver significant free cash flows.
Conclusion
Overall, the investors who already have Crescent Point Energy in their portfolio are advised to hold their position into the stock and new investors are advised to stay away from the stock as of now looking at the hugely debt-burdened company’s balance sheet with total debt of $2.40 billion against weak total cash of $3.22 million only, restricting the company to plan for future growth investments. Only the profit margin of 14.71% seems satisfactory.
