Published: November 8, 2023 |

[Click image to enlarge]

[Click image to enlarge]

Crescent Point Energy has entered into an arrangement agreement to acquire Hammerhead Energy Inc., 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. 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,” said Craig Bryksa, president and CEO of Crescent Point.

“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,” added Bryksa.

“We are exceptionally proud of having built a business that has proven to be a top tier asset that has delivered significant organic growth. A combination of asset quality, exceptional people, and a solid business plan has positioned the company to be an attractive acquisition target that will benefit from a lower cost of capital inside of a larger enterprise,” said Scott Sobie, president and CEO of Hammerhead.

“On behalf of my fellow board members and all shareholders, I want to personally congratulate the Hammerhead team for the exceptional performance they have delivered over many years that has resulted in this excellent outcome. Riverstone first invested in Hammerhead in 2014 as a 1,100 boe/d producer, and subsequently invested additional capital over the last nine years to support the company’s leadership, their skills, and these assets,” said Robert Tichio, chairman of the board of Hammerhead.

KEY HIGHLIGHTS FOR CRESCENT POINT

• 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 $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 favorable 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 More than 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 percent oil and liquids) expected in 2024 to more than 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 More than 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 more than 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 percent to Oil and Liquids): Pro-forma production is expected to total more than 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.

Crescent Point Energy, is an independent oil and gas company that acquires, explores for and develops oil and gas properties. Its portfolio of products includes light and medium crude oil, heavy crude oil, tight oil, natural gas liquids, shale gas and conventional natural gas. The company has interest in light and medium oil and natural gas reserves in Western Canada and the U.S. Crescent Point has crude oil and natural gas properties in Alberta, Saskatchewan, and Manitoba provinces in Canada; and Montana and North Dakota in the U.S. The company’s portfolio of assets includes the Viewfield Bakken, Torquay, Shaunavon, and North Dakota basin. Crescent Point is headquartered in Calgary, Alberta, Canada.

Hammerhead Energy is a Calgary, Canada-based energy company, with assets and operations in Alberta targeting the Montney formation. Hammerhead Resources Inc., the predecessor entity to Hammerhead Resources, a wholly owned subsidiary of Hammerhead, was formed in 2009.

Be in-the-know when you’re on-the-go!

CLICK HERE to register your email address.

Copyright © 2023 Mining Connection LLC. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.

For licensing permission, .(JavaScript must be enabled to view this email address)