Exhibit 99.1
CONSOLIDATED BALANCE SHEETS
As at | |||||||
March 31, | December 31, | ||||||
(UNAUDITED) (Cdn$ millions) | Notes | 2020 | 2019 | ||||
ASSETS | |||||||
Cash | 19.6 | 56.9 | |||||
Accounts receivable | 196.7 | 295.9 | |||||
Prepaids and deposits | 12.6 | 6.9 | |||||
Derivative asset | 18 | 309.3 | 76.8 | ||||
Assets held for sale | 5 | — | 195.0 | ||||
Total current assets | 538.2 | 631.5 | |||||
Derivative asset | 18 | 420.1 | 251.1 | ||||
Other long-term assets | 16.9 | 22.4 | |||||
Exploration and evaluation | 4, 5 | 186.0 | 245.5 | ||||
Property, plant and equipment | 5, 6 | 4,324.7 | 7,841.6 | ||||
Right-of-use asset | 9 | 116.1 | 123.5 | ||||
Goodwill | 5, 7 | 223.9 | 230.9 | ||||
Deferred income tax | 1,383.8 | 745.3 | |||||
Total assets | 7,209.7 | 10,091.8 | |||||
LIABILITIES | |||||||
Accounts payable and accrued liabilities | 418.2 | 479.4 | |||||
Current portion of long-term debt | 8 | — | 201.0 | ||||
Other current liabilities | 45.1 | 87.0 | |||||
Liabilities associated with assets held for sale | 5 | — | 7.9 | ||||
Total current liabilities | 463.3 | 775.3 | |||||
Long-term debt | 8 | 2,539.2 | 2,704.1 | ||||
Other long-term liabilities | 2.1 | 10.8 | |||||
Lease liability | 9 | 140.6 | 149.9 | ||||
Decommissioning liability | 5, 10 | 952.4 | 1,109.0 | ||||
Total liabilities | 4,097.6 | 4,749.1 | |||||
SHAREHOLDERS’ EQUITY | |||||||
Shareholders’ capital | 11 | 16,443.2 | 16,449.0 | ||||
Contributed surplus | 26.7 | 35.1 | |||||
Deficit | 12 | (13,966.2 | ) | (11,636.9 | ) | ||
Accumulated other comprehensive income | 608.4 | 495.5 | |||||
Total shareholders' equity | 3,112.1 | 5,342.7 | |||||
Total liabilities and shareholders' equity | 7,209.7 | 10,091.8 |
Commitments (Note 19)
See accompanying notes to the consolidated financial statements.
CRESCENT POINT ENERGY CORP. | 1 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31 | |||||||
2019 (Revised) | |||||||
(UNAUDITED) (Cdn$ millions, except per share and shares outstanding amounts) | Notes | 2020 | |||||
REVENUE AND OTHER INCOME | |||||||
Oil and gas sales | 21 | 548.4 | 892.4 | ||||
Purchased product sales | 11.3 | 7.3 | |||||
Royalties | (73.0 | ) | (119.2 | ) | |||
Oil and gas revenue | 486.7 | 780.5 | |||||
Commodity derivative gains (losses) | 14, 18 | 314.9 | (161.2 | ) | |||
Other income | 5 | 303.5 | 29.8 | ||||
1,105.1 | 649.1 | ||||||
EXPENSES | |||||||
Operating | 158.3 | 202.2 | |||||
Purchased product | 8.6 | 7.1 | |||||
Transportation | 28.8 | 33.3 | |||||
General and administrative | 24.5 | 20.0 | |||||
Interest | 15 | 9.5 | 49.9 | ||||
Foreign exchange gain | 16 | (8.8 | ) | (7.7 | ) | ||
Share-based compensation | (8.1 | ) | 3.9 | ||||
Depletion, depreciation, amortization and impairment | 4, 6, 9 | 3,814.7 | 336.1 | ||||
Accretion and financing | 9, 10 | 6.9 | 9.3 | ||||
4,034.4 | 654.1 | ||||||
Net income (loss) before tax | (2,929.3 | ) | (5.0 | ) | |||
Tax recovery | |||||||
Current | — | — | |||||
Deferred | (605.2 | ) | (6.9 | ) | |||
Net income (loss) | (2,324.1 | ) | 1.9 | ||||
Other comprehensive income (loss) | |||||||
Items that may be subsequently reclassified to profit or loss | |||||||
Foreign currency translation of foreign operations | 112.9 | (49.8 | ) | ||||
Comprehensive income (loss) | (2,211.2 | ) | (47.9 | ) | |||
Net income (loss) per share | |||||||
Basic | (4.40 | ) | — | ||||
Diluted | (4.40 | ) | — | ||||
Weighted average shares outstanding | |||||||
Basic | 528,284,435 | 550,292,056 | |||||
Diluted | 528,284,435 | 550,299,674 |
See accompanying notes to the consolidated financial statements.
CRESCENT POINT ENERGY CORP. | 2 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED) (Cdn$ millions, except per share amounts) | Notes | Shareholders’ capital | Contributed surplus | Deficit | Accumulated other comprehensive income | Total shareholders’ equity | ||||||||||
December 31, 2019 | 16,449.0 | 35.1 | (11,636.9 | ) | 495.5 | 5,342.7 | ||||||||||
Redemption of restricted shares | 11 | 6.9 | (7.0 | ) | 0.1 | — | ||||||||||
Common shares repurchased | 11 | (12.7 | ) | (12.7 | ) | |||||||||||
Forfeit of restricted shares | 17 | (1.4 | ) | (1.4 | ) | |||||||||||
Net income (loss) | (2,324.1 | ) | (2,324.1 | ) | ||||||||||||
Dividends ($0.01 per share) | (5.3 | ) | (5.3 | ) | ||||||||||||
Foreign currency translation adjustment | 112.9 | 112.9 | ||||||||||||||
March 31, 2020 | 16,443.2 | 26.7 | (13,966.2 | ) | 608.4 | 3,112.1 | ||||||||||
December 31, 2018 | 16,546.9 | 41.4 | (10,567.2 | ) | 591.7 | 6,612.8 | ||||||||||
Adoption of accounting policy | (14.4 | ) | (14.4 | ) | ||||||||||||
Redemption of restricted shares | 14.2 | (14.8 | ) | (0.6 | ) | |||||||||||
Common shares repurchased | (13.3 | ) | (13.3 | ) | ||||||||||||
Share-based compensation | 5.4 | 5.4 | ||||||||||||||
Forfeit of restricted shares | (1.0 | ) | (1.0 | ) | ||||||||||||
Net income (loss) | 1.9 | 1.9 | ||||||||||||||
Dividends ($0.01 per share) | (5.6 | ) | (5.6 | ) | ||||||||||||
Foreign currency translation adjustment | (49.8 | ) | (49.8 | ) | ||||||||||||
March 31, 2019 | 16,547.8 | 31.0 | (10,585.3 | ) | 541.9 | 6,535.4 |
See accompanying notes to the consolidated financial statements.
CRESCENT POINT ENERGY CORP. | 3 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31 | |||||||
(UNAUDITED) (Cdn$ millions) | Notes | 2020 | 2019 | ||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | |||||||
Net income (loss) | (2,324.1 | ) | 1.9 | ||||
Items not affecting cash | |||||||
Other income | (302.0 | ) | (4.8 | ) | |||
Deferred tax recovery | (605.2 | ) | (6.9 | ) | |||
Share-based compensation | (1.0 | ) | 3.5 | ||||
Depletion, depreciation, amortization and impairment | 4, 6, 9 | 3,814.7 | 336.1 | ||||
Accretion | 10 | 5.0 | 9.3 | ||||
Unrealized (gains) losses on derivatives | 18 | (418.5 | ) | 270.4 | |||
Translation of US dollar long-term debt | 16 | 197.9 | (94.5 | ) | |||
Other | — | 0.3 | |||||
Realized gain on cross currency swap maturity | 16 | (62.0 | ) | (2.2 | ) | ||
Decommissioning expenditures | 10 | (8.6 | ) | (5.3 | ) | ||
Change in non-cash working capital | 20 | 33.1 | (91.0 | ) | |||
329.3 | 416.8 | ||||||
INVESTING ACTIVITIES | |||||||
Development capital and other expenditures | 4, 6 | (331.5 | ) | (394.5 | ) | ||
Capital acquisitions | 5 | (1.4 | ) | (2.3 | ) | ||
Capital dispositions | 5 | 506.9 | 5.1 | ||||
Other long-term assets | — | 18.6 | |||||
Change in non-cash working capital | 20 | (16.2 | ) | 43.7 | |||
157.8 | (329.4 | ) | |||||
FINANCING ACTIVITIES | |||||||
Issue of shares, net of issue costs | (0.1 | ) | (0.6 | ) | |||
Common shares repurchased | 11 | (12.7 | ) | (13.3 | ) | ||
Decrease in bank debt, net | 20 | (337.5 | ) | (39.8 | ) | ||
Repayment of senior guaranteed notes | 8, 20 | (224.4 | ) | — | |||
Realized gain on cross currency swap maturity | 16, 20 | 62.0 | 2.2 | ||||
Payments on principal portion of lease liability | 9, 20 | (7.9 | ) | (8.3 | ) | ||
Cash dividends | 20 | (5.3 | ) | (5.6 | ) | ||
Change in non-cash working capital | 20 | — | (11.0 | ) | |||
(525.9 | ) | (76.4 | ) | ||||
Impact of foreign currency on cash balances | 1.5 | (0.5 | ) | ||||
INCREASE (DECREASE) IN CASH | (37.3 | ) | 10.5 | ||||
CASH AT BEGINNING OF PERIOD | 56.9 | 15.3 | |||||
CASH AT END OF PERIOD | 19.6 | 25.8 |
See accompanying notes to the consolidated financial statements.
Supplementary Information:
Cash taxes paid | (0.1 | ) | (0.1 | ) | ||
Cash interest paid | (12.8 | ) | (31.5 | ) |
CRESCENT POINT ENERGY CORP. | 4 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 (UNAUDITED)
1. | STRUCTURE OF THE BUSINESS |
The principal undertaking of Crescent Point Energy Corp. (the “Company” or “Crescent Point”) is to carry on the business of acquiring, developing and holding interests in petroleum and natural gas properties and assets related thereto through a general partnership and wholly owned subsidiaries.
Crescent Point is the ultimate parent and is amalgamated in Alberta, Canada under the Alberta Business Corporations Act. The address of the principal place of business is 2000, 585 - 8th Ave S.W., Calgary, Alberta, Canada, T2P 1G1.
These interim consolidated financial statements were approved and authorized for issue by the Company's Board of Directors on May 5, 2020.
2. | BASIS OF PREPARATION |
These interim consolidated financial statements are presented under International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). These interim consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim consolidated financial statements, including International Accounting Standard (“IAS”) 34 Interim Financial Reporting and have been prepared following the same accounting policies as the annual consolidated financial statements for the year ended December 31, 2019 except as described in Note 3 - "Changes in Accounting Policies". Certain information and disclosures included in the notes to the annual consolidated financial statements are condensed herein or are disclosed on an annual basis only. Accordingly, these interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2019.
The policies applied in these consolidated financial statements are based on IFRS issued and outstanding as of May 5, 2020, the date the Board of Directors approved the statements.
The Company’s presentation currency is Canadian dollars and all amounts reported are Canadian dollars unless noted otherwise. References to “US$” are to United States ("U.S.") dollars.
a) Use of estimates and judgments
Impact of COVID-19
The COVID-19 pandemic, and actions taken in response, have resulted in a significant contraction in the global economy. This has caused an unprecedented disruption in the oil and gas industry and negatively impacted the demand for and pricing of energy products, including crude oil, NGLs and natural gas produced by the Company.
As there are many variables and uncertainties regarding the COVID-19 pandemic, as well as its impact on the economic environment, including the duration and magnitude of the disruption in the oil and gas industry, it is not possible to precisely estimate the potential impact of the COVID-19 pandemic on the Company's financial condition and operations. There may also be effects that are not currently known as the full impact of the COVID-19 pandemic is still uncertain. This presents various risks and uncertainty, including to management's judgments, estimates and assumptions that affect the application of accounting policies. Further information on the Company's use of estimates and judgments can be found in the notes to the annual consolidated financial statements for the year ended December 31, 2019.
The following outlines changes to and additional use of estimates and assumptions for the period ended March 31, 2020:
Decommissioning Liability
Upon retirement of its oil and gas assets, the Company anticipates incurring substantial costs associated with decommissioning. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The Company previously recorded the liability using estimated inflation and the relevant risk-free rate to discount cash flows. At March 31, 2020, the Company used a derived inflation from the real-return rate and discounted using the relevant risk-free rate. This change in accounting estimate is applied on a prospective basis.
Saskatchewan gas infrastructure asset disposition
Significant judgments were involved in assessing the economic benefit under the purchase and sale agreement in determining the right to control the assets for the conditions of a sale. Judgments were also involved in forecasting future cash flows to determine the Company's expected utilization of the asset under lease accounting. If one or a combination of the underlying assumptions were materially different than the assumptions used in the Company’s analysis, this could potentially impact the underlying accounting treatment for the transaction.
CRESCENT POINT ENERGY CORP. | 5 |
3. CHANGES IN ACCOUNTING POLICIES
Updated significant accounting policies and amendments
The following change to the Company's accounting policy is applicable from January 1, 2020:
• | IFRS 3 Business Combinations - IFRS 3 was amended in October 2018 to revise the definition of the term 'business'. The amendments narrowed the definitions of a business and outputs and includes an optional concentration test. The adoption of this amendment did not have a material impact on the Company's consolidated financial statements. |
4. | EXPLORATION AND EVALUATION ASSETS |
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Exploration and evaluation assets at cost | 1,829.1 | 1,848.1 | ||||
Accumulated amortization | (1,643.1 | ) | (1,602.6 | ) | ||
Net carrying amount | 186.0 | 245.5 | ||||
Reconciliation of movements during the period | ||||||
Cost, beginning of period | 1,848.1 | 2,325.0 | ||||
Accumulated amortization, beginning of period | (1,602.6 | ) | (1,852.4 | ) | ||
Net carrying amount, beginning of period | 245.5 | 472.6 | ||||
Net carrying amount, beginning of period | 245.5 | 472.6 | ||||
Acquisitions through business combinations, net | 1.3 | 7.3 | ||||
Additions | 74.6 | 384.9 | ||||
Dispositions | (0.2 | ) | (101.9 | ) | ||
Transfers to property, plant and equipment | (119.7 | ) | (380.6 | ) | ||
Amortization | (21.7 | ) | (129.1 | ) | ||
Foreign exchange | 6.2 | (7.7 | ) | |||
Net carrying amount, end of period | 186.0 | 245.5 |
Impairment test of exploration and evaluation ("E&E") assets
At March 31, 2020, the value of the Company's market capitalization as compared to shareholders' equity as well as the indication that potential further development of E&E assets may not be currently economical was an indicator of impairment. As a result, impairment testing was required and the Company prepared estimates of future cash flows and fair market values of undeveloped land to determine the recoverable amount of the respective assets. As a result of these tests, the Company concluded that the estimated recoverable amounts exceeded the carrying amounts and no impairments were recorded.
CRESCENT POINT ENERGY CORP. | 6 |
5. | CAPITAL ACQUISITIONS AND DISPOSITIONS |
In the three months ended March 31, 2020, the Company incurred $4.7 million (three months ended March 31, 2019 - $0.9 million) of transaction costs related to acquisitions through business combinations and dispositions that were recorded as general and administrative expenses.
a) Major Property Dispositions
Saskatchewan gas infrastructure asset disposition
In the three months ended March 31, 2020, the Company disposed of certain Saskatchewan gas infrastructure assets for consideration of $500.0 million. These assets were classified as held for sale at December 31, 2019, and had a net carrying value of $198.3 million, resulting in a gain of $301.7 million.
b) Minor property acquisitions and dispositions
In the three months ended March 31, 2020, the Company completed minor property acquisitions and dispositions for net consideration of $5.5 million. These assets had a net carrying value of $0.3 million, resulting in a gain of $5.8 million.
($ millions) | Saskatchewan gas infrastructure | Other minor, net | |||||
Dispositions: | |||||||
Consideration | |||||||
Cash | 500.0 | 5.5 | |||||
500.0 | 5.5 | ||||||
Carrying Value | |||||||
Exploration and evaluation | — | 1.1 | |||||
Property, plant and equipment | (199.4 | ) | (19.2 | ) | |||
Goodwill | (6.4 | ) | (0.6 | ) | |||
Decommissioning liability | 7.5 | 19.0 | |||||
(198.3 | ) | 0.3 | |||||
Gain on capital dispositions | 301.7 | 5.8 |
CRESCENT POINT ENERGY CORP. | 7 |
6. | PROPERTY, PLANT AND EQUIPMENT |
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Development and production assets | 23,324.7 | 23,038.6 | ||||
Corporate assets | 119.0 | 117.2 | ||||
Property, plant and equipment at cost | 23,443.7 | 23,155.8 | ||||
Accumulated depletion, depreciation and impairment | (19,119.0 | ) | (15,314.2 | ) | ||
Net carrying amount | 4,324.7 | 7,841.6 | ||||
Reconciliation of movements during the period | ||||||
Development and production assets | ||||||
Cost, beginning of period | 23,038.6 | 26,635.3 | ||||
Accumulated depletion and impairment, beginning of period | (15,251.0 | ) | (16,262.2 | ) | ||
Net carrying amount, beginning of period | 7,787.6 | 10,373.1 | ||||
Net carrying amount, beginning of period | 7,787.6 | 10,373.1 | ||||
Acquisitions through business combinations, net | 0.1 | 8.7 | ||||
Additions | 95.3 | 1,075.7 | ||||
Dispositions, net | (23.7 | ) | (1,230.9 | ) | ||
Transfers from exploration and evaluation assets | 119.7 | 380.6 | ||||
Reclassified as assets held for sale | — | (195.0 | ) | |||
Depletion | (226.0 | ) | (1,087.4 | ) | ||
Impairment | (3,557.8 | ) | (1,466.4 | ) | ||
Foreign exchange | 75.3 | (70.8 | ) | |||
Net carrying amount, end of period | 4,270.5 | 7,787.6 | ||||
Cost, end of period | 23,324.7 | 23,038.6 | ||||
Accumulated depletion and impairment, end of period | (19,054.2 | ) | (15,251.0 | ) | ||
Net carrying amount, end of period | 4,270.5 | 7,787.6 | ||||
Corporate assets | ||||||
Cost, beginning of period | 117.2 | 114.6 | ||||
Accumulated depreciation, beginning of period | (63.2 | ) | (57.5 | ) | ||
Net carrying amount, beginning of period | 54.0 | 57.1 | ||||
Net carrying amount, beginning of period | 54.0 | 57.1 | ||||
Additions | 1.2 | 2.9 | ||||
Depreciation | (1.2 | ) | (5.9 | ) | ||
Foreign exchange | 0.2 | (0.1 | ) | |||
Net carrying amount, end of period | 54.2 | 54.0 | ||||
Cost, end of period | 119.0 | 117.2 | ||||
Accumulated depreciation, end of period | (64.8 | ) | (63.2 | ) | ||
Net carrying amount, end of period | 54.2 | 54.0 |
Direct general and administrative costs capitalized by the Company during the three months ended March 31, 2020 were $9.1 million (year ended December 31, 2019 - $40.0 million), including $0.3 million of share-based compensation recoveries (year ended December 31, 2019 - $4.3 million of share-based compensation costs).
CRESCENT POINT ENERGY CORP. | 8 |
Impairment test of property, plant and equipment
At March 31, 2020, the significant decrease in forecast benchmark commodity prices and the value of the Company's market capitalization as compared to shareholders' equity were indicators of impairment. As a result, impairment and recovery testing were required and the Company prepared estimates of future cash flows to determine the recoverable amount of the respective assets.
The following table outlines the forecast benchmark commodity prices and the exchange rate used in the impairment calculation of PP&E at March 31, 2020:
2020 (1) | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 (3) | ||||||||||||
WTI ($US/bbl) (2) | 29.17 | 40.45 | 49.17 | 53.28 | 55.66 | 56.87 | 58.01 | 59.17 | 60.35 | 61.56 | 62.79 | |||||||||||
Exchange Rate ($US/$Cdn) | 0.707 | 0.728 | 0.745 | 0.747 | 0.748 | 0.750 | 0.750 | 0.750 | 0.750 | 0.750 | 0.750 | |||||||||||
WTI ($Cdn/bbl) | 41.26 | 55.56 | 66.00 | 71.33 | 74.41 | 75.83 | 77.35 | 78.89 | 80.47 | 82.08 | 83.72 | |||||||||||
AECO ($Cdn/MMbtu) (2) | 1.74 | 2.20 | 2.38 | 2.45 | 2.53 | 2.60 | 2.66 | 2.72 | 2.79 | 2.85 | 2.92 |
(1) | Effective April 1, 2020. |
(2) | The forecast benchmark commodity prices listed above are adjusted for quality differentials, heat content, distance to market and other factors in performing the impairment tests. |
(3) | Forecast benchmark commodity prices are assumed to increase by 2.0% in each year after 2030 to the end of the reserve life. Exchange rates are assumed to be constant at 0.750. |
At March 31, 2020, the Company determined that the carrying amount of the Southeast Saskatchewan, Southwest Saskatchewan, Northern U.S., and Southern Alberta CGUs exceeded their recoverable amount. The full amount of the impairments were attributed to PP&E and, as a result, impairment losses of $3.56 billion were recorded as a component of DD&A and impairment expense. The impairment loss was due to the significant decrease in forecast benchmark commodity prices used in impairment testing at March 31, 2020 compared to December 31, 2019.
In future periods, the impairment can be reversed up to the original carrying value less any associated DD&A if the estimated recoverable amounts of the CGUs exceed their carrying amount. At March 31, 2020, the after tax impairment losses that can be reversed for the Canada and U.S. operating segments were $5.89 billion and $471.4 million, respectively.
The following table summarizes the impairment expense for the three months ended March 31, 2020 by CGU:
CGU ($ millions, except %) | Operating segment | Recoverable amount | Discount rate | Impairment | Impairment, net of tax | ||||
Southeast Saskatchewan | Canada | 2,500.0 | 15.00 | % | 1,726.1 | 1,286.7 | |||
Southwest Saskatchewan | Canada | 940.9 | 15.00 | % | 866.7 | 646.1 | |||
Northern U.S. | U.S. | 465.8 | 15.00 | % | 549.7 | 410.0 | |||
Southern Alberta | Canada | 489.2 | 15.00 | % | 415.3 | 309.6 | |||
Total impairment | 4,395.9 | 3,557.8 | 2,652.4 |
Changes in any of the key judgments, such as a revision in reserves, changes in forecast benchmark commodity prices, foreign exchange rates, capital or operating costs would impact the recoverable amounts of assets and any recoveries or impairment charges would affect net income. The following sensitivities show the resulting impact on income before tax of the changes in discount rate and forecast benchmark commodity price estimates at March 31, 2020, with all other variables held constant:
CGU ($ millions) | Discount Rate | Commodity Prices | ||||||||||
Increase 1% | Decrease 1% | Increase 5% | Decrease 5% | |||||||||
Southeast Saskatchewan | (139.3 | ) | 153.9 | 255.8 | (251.4 | ) | ||||||
Southwest Saskatchewan | (55.5 | ) | 61.3 | 109.8 | (108.9 | ) | ||||||
Northern U.S. | (35.8 | ) | 39.8 | 77.7 | (79.4 | ) | ||||||
Southern Alberta | (31.6 | ) | 35.0 | 60.8 | (64.0 | ) | ||||||
Increase (decrease) | (262.2 | ) | 290.0 | 504.1 | (503.7 | ) |
The movement in the deferred tax asset was a result of the impairment expense recognized during the three months ended March 31, 2020. Deferred tax assets are recognized to the extent of expected utilization of tax attributes, based on estimated undiscounted future cashflows included in the Company's independent reserve report.
CRESCENT POINT ENERGY CORP. | 9 |
7. | GOODWILL |
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Goodwill, beginning of period | 230.9 | 244.0 | ||||
Saskatchewan gas infrastructure asset disposition | (6.4 | ) | — | |||
Southeast Saskatchewan asset dispositions | — | (13.1 | ) | |||
Other dispositions | (0.6 | ) | — | |||
Goodwill, end of period | 223.9 | 230.9 |
Goodwill has been assigned to the Canadian operating segment.
Impairment test of goodwill
At March 31, 2020, the value of the Company's market capitalization as compared to shareholders' equity was an indicator of impairment. As a result, impairment testing was required and the Company prepared estimates of future cash flows to determine the recoverable amount of goodwill.
The impairment tests of goodwill compared the recoverable amount of the Company's PP&E and E&E to the carrying amount of the combined PP&E, E&E and goodwill at March 31, 2020. As a result of these tests, the Company concluded that the estimated recoverable amounts exceeded the carrying amounts and no impairments were recorded.
8. | LONG-TERM DEBT |
The following table reconciles long-term debt:
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Bank debt (1) | 496.5 | 806.3 | ||||
Senior guaranteed notes (2) | 2,042.7 | 2,098.8 | ||||
Long-term debt | 2,539.2 | 2,905.1 | ||||
Long-term debt due within one year | — | 201.0 | ||||
Long-term debt due beyond one year | 2,539.2 | 2,704.1 |
(1) | The Company has London Inter-bank Offered Rate ("LIBOR") loans under its bank credit facilities. The US dollar amounts of the LIBOR loans were fixed for purposes of interest and principal repayments. At March 31, 2020, the total notional amount due upon bank debt maturity was $482.3 million (December 31, 2019 - $824.2 million). |
(2) | The Company entered into cross currency swaps ("CCS") and a foreign exchange swap concurrent with the issuance of the US dollar senior guaranteed notes to fix the US dollar amount of the notes for the purpose of principal repayment at Canadian dollar notional amounts. At March 31, 2020, the total notional principal due on the maturity of the senior guaranteed notes was $1.66 billion (December 31, 2019 - $1.82 billion) of which nil (December 31, 2019 - $158.3 million) was due within one year. |
Bank debt
The Company has combined facilities of $3.00 billion, including a $2.90 billion syndicated unsecured credit facility with fourteen banks and a $100.0 million unsecured operating credit facility with one Canadian chartered bank. The current maturity dates of the facilities is October 25, 2023. Both of these facilities constitute revolving credit facilities and are extendible annually.
The credit facilities bear interest at the applicable market rate plus a margin based on a sliding scale ratio of the Company's senior debt to earnings before interest, taxes, depletion, depreciation, amortization and impairment, adjusted for payments on lease liability and certain non-cash items including unrealized derivatives, translation of US dollar long-term debt, equity settled share-based compensation expense and accretion and financing expense ("adjusted EBITDA").
The credit facilities and senior guaranteed notes have covenants which restrict the Company's ratio of senior debt to adjusted EBITDA to a maximum of 3.5:1.0, the ratio of total debt to adjusted EBITDA to a maximum of 4.0:1.0 and the ratio of senior debt to capital, adjusted for certain non-cash items as noted above, to a maximum of 0.55:1.0. The Company was in compliance with all debt covenants at March 31, 2020.
The Company had letters of credit in the amount of $7.7 million outstanding at March 31, 2020 (December 31, 2019 - $6.5 million).
CRESCENT POINT ENERGY CORP. | 10 |
Senior guaranteed notes
The Company has closed private offerings of senior guaranteed notes raising total gross proceeds of US$1.26 billion and Cdn$270.0 million. The notes are unsecured and rank pari passu with the Company's bank credit facilities and carry a bullet repayment on maturity. The senior guaranteed notes have financial covenants similar to those of the combined credit facilities described above. The Company's senior guaranteed notes are detailed below:
Principal ($ millions) | Coupon Rate | Principal Due on Maturity (1) (Cdn$ millions) | Interest Payment Dates | Maturity Date | Financial statement carrying value | |||||||
March 31, 2020 | December 31, 2019 | |||||||||||
US$155.0 | 6.03 | % | — | September 24 and March 24 | March 24, 2020 | — | 201.0 | |||||
Cdn$50.0 | 5.53 | % | 50.0 | October 14 and April 14 | April 14, 2021 | 50.0 | 50.0 | |||||
US$82.0 | 5.13 | % | 79.0 | October 14 and April 14 | April 14, 2021 | 115.8 | 106.3 | |||||
US$52.5 | 3.29 | % | 56.3 | December 20 and June 20 | June 20, 2021 | 74.1 | 68.1 | |||||
Cdn$25.0 | 4.76 | % | 25.0 | November 22 and May 22 | May 22, 2022 | 25.0 | 25.0 | |||||
US$200.0 | 4.00 | % | 199.1 | November 22 and May 22 | May 22, 2022 | 282.4 | 259.3 | |||||
US$61.5 | 4.12 | % | 80.3 | October 11 and April 11 | April 11, 2023 | 86.8 | 79.7 | |||||
Cdn$80.0 | 3.58 | % | 80.0 | October 11 and April 11 | April 11, 2023 | 80.0 | 80.0 | |||||
Cdn$10.0 | 4.11 | % | 10.0 | December 12 and June 12 | June 12, 2023 | 10.0 | 10.0 | |||||
US$270.0 | 3.78 | % | 274.7 | December 12 and June 12 | June 12, 2023 | 381.2 | 350.1 | |||||
Cdn$40.0 | 3.85 | % | 40.0 | December 20 and June 20 | June 20, 2024 | 40.0 | 40.0 | |||||
US$257.5 | 3.75 | % | 276.4 | December 20 and June 20 | June 20, 2024 | 363.6 | 333.8 | |||||
US$82.0 | 4.30 | % | 107.0 | October 11 and April 11 | April 11, 2025 | 115.8 | 106.3 | |||||
Cdn$65.0 | 3.94 | % | 65.0 | October 22 and April 22 | April 22, 2025 | 65.0 | 65.0 | |||||
US$230.0 | 4.08 | % | 291.1 | October 22 and April 22 | April 22, 2025 | 324.8 | 298.2 | |||||
US$20.0 | 4.18 | % | 25.3 | October 22 and April 22 | April 22, 2027 | 28.2 | 26.0 | |||||
Senior guaranteed notes | 1,659.2 | 2,042.7 | 2,098.8 | |||||||||
Senior guaranteed notes due within one year | — | 201.0 | ||||||||||
Senior guaranteed notes due beyond one year | 2,042.7 | 1,897.8 |
(1) | Includes underlying derivatives which manage the Company's foreign exchange exposure on its US dollar senior guaranteed notes. The Company considers this to be the economic amount due at maturity instead of the financial statement carrying amount. |
Concurrent with the issuance of US$1.23 billion senior guaranteed notes, the Company entered into CCS to manage the Company's foreign exchange risk. The CCS fix the US dollar amount of the notes for purposes of interest and principal repayments at a notional amount of $1.36 billion. Concurrent with the issuance of US$30.0 million senior guaranteed notes, the Company entered a foreign exchange swap which fixed the principal repayment at a notional amount of $32.2 million. See Note 18 - “Financial Instruments and Derivatives” for additional information.
CRESCENT POINT ENERGY CORP. | 11 |
9. | LEASES |
Right-of-use asset
The following table reconciles the right-of-use ("ROU") asset by class as at March 31, 2020:
($ millions) | Office (1) | Fleet Vehicles | Other | Total | ||||||||
ROU asset at cost | 120.4 | 17.1 | 11.1 | 148.6 | ||||||||
Accumulated depreciation | (21.0 | ) | (8.3 | ) | (3.2 | ) | (32.5 | ) | ||||
Net carrying amount | 99.4 | 8.8 | 7.9 | 116.1 | ||||||||
Reconciliation of movements during the period | ||||||||||||
Cost, beginning of period | 120.1 | 17.0 | 10.9 | 148.0 | ||||||||
Accumulated depreciation, beginning of period | (14.8 | ) | (7.0 | ) | (2.7 | ) | (24.5 | ) | ||||
Net carrying amount, beginning of period | 105.3 | 10.0 | 8.2 | 123.5 | ||||||||
Net carrying amount, beginning of period | 105.3 | 10.0 | 8.2 | 123.5 | ||||||||
Additions | 0.1 | — | 0.1 | 0.2 | ||||||||
Depreciation | (6.2 | ) | (1.3 | ) | (0.5 | ) | (8.0 | ) | ||||
Foreign exchange | 0.2 | 0.1 | 0.1 | 0.4 | ||||||||
Net carrying amount, end of period | 99.4 | 8.8 | 7.9 | 116.1 |
(1) | A portion of the Company's office space is subleased. During the three months ended March 31, 2020, the Company recorded sublease income of $1.5 million as a component of other income. |
Lease liability
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Lease liability, beginning of period | 181.2 | 223.8 | ||||
Additions | 0.3 | 5.5 | ||||
Dispositions | — | (3.0 | ) | |||
Financing | 1.9 | 8.9 | ||||
Payments on lease liability | (9.8 | ) | (34.1 | ) | ||
Lease modification | — | (19.7 | ) | |||
Foreign exchange | 0.3 | (0.2 | ) | |||
Lease liability, end of period | 173.9 | 181.2 | ||||
Expected to be incurred within one year | 33.3 | 31.3 | ||||
Expected to be incurred beyond one year | 140.6 | 149.9 |
Some leases contain variable payments that are not included within the lease liability as they are based on amounts determined by the lessor annually and not dependent on an index or rate. For the three months ended March 31, 2020, variable lease payments of $0.5 million were included in general and administrative expenses relating to property tax payments on office leases.
During the three months ended March 31, 2020, the Company recorded $0.2 million in general and administrative expenses related to short-term leases and leases for low dollar value underlying assets.
The undiscounted cash flows relating to the lease liability are as follows:
($ millions) | March 31, 2020 | ||
1 year | 33.7 | ||
2 to 3 years | 46.4 | ||
4 to 5 years | 38.7 | ||
More than 5 years | 89.5 | ||
Total (1) | 208.3 |
(1) | Includes both the principal and amounts representing interest. |
CRESCENT POINT ENERGY CORP. | 12 |
10. | DECOMMISSIONING LIABILITY |
Upon retirement of its oil and gas assets, the Company anticipates substantial costs associated with decommissioning. The estimated cash flows have been discounted using a risk-free rate of 1.25 percent and a derived inflation rate of 0.75 percent (December 31, 2019 - risk-free rate of 1.75 percent and inflation rate of 2 percent). Refer to Note 2 - "Basis of Preparation" for additional information.
The following table reconciles the decommissioning liability:
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Decommissioning liability, beginning of period | 1,144.0 | 1,230.7 | ||||
Liabilities incurred | 9.6 | 30.7 | ||||
Liabilities acquired through capital acquisitions | — | 0.7 | ||||
Liabilities disposed through capital dispositions | (18.6 | ) | (223.6 | ) | ||
Liabilities settled | (8.6 | ) | (28.7 | ) | ||
Revaluation of acquired decommissioning liabilities | 0.1 | 0.9 | ||||
Change in estimated future costs | (39.5 | ) | 6.2 | |||
Change in discount rate | (130.3 | ) | 115.3 | |||
Accretion expense | 5.0 | 23.5 | ||||
Reclassified as liabilities associated with assets held for sale | — | (7.9 | ) | |||
Foreign exchange | 0.8 | (3.8 | ) | |||
Decommissioning liability, end of period | 962.5 | 1,144.0 | ||||
Expected to be incurred within one year | 10.1 | 35.0 | ||||
Expected to be incurred beyond one year | 952.4 | 1,109.0 |
11. | SHAREHOLDERS' CAPITAL |
Crescent Point has an unlimited number of common shares authorized for issuance.
March 31, 2020 | December 31, 2019 | |||||||||||
Number of shares | Amount ($ millions) | Number of shares | Amount ($ millions) | |||||||||
Common shares, beginning of period | 529,399,923 | 16,705.1 | 550,151,561 | 16,803.0 | ||||||||
Issued on redemption of restricted shares | 1,725,452 | 6.9 | 3,321,362 | 24.7 | ||||||||
Common shares repurchased | (2,165,600 | ) | (12.7 | ) | (24,073,000 | ) | (122.6 | ) | ||||
Common shares, end of period | 528,959,775 | 16,699.3 | 529,399,923 | 16,705.1 | ||||||||
Cumulative share issue costs, net of tax | — | (256.1 | ) | — | (256.1 | ) | ||||||
Total shareholders’ capital, end of period | 528,959,775 | 16,443.2 | 529,399,923 | 16,449.0 |
Normal Course Issuer Bid ("NCIB")
In January 2020, the Company purchased and cancelled 2.2 million common shares for total consideration of $12.7 million. The total cost paid, including commissions and fees, was recognized directly as a reduction in shareholders' equity. Under the NCIB, all common shares purchased are cancelled.
On March 5, 2020, the Company announced the approval by the Toronto Stock Exchange of its notice to implement a NCIB. The NCIB allows the Company to purchase, for cancellation, up to 36,884,438 common shares, or seven percent of the Company's public float, as at February 28, 2020. The NCIB commenced on March 9, 2020 and is due to expire on March 8, 2021. In response to the current price environment, the Company is deferring share repurchases under its NCIB with flexibility for it to be resumed as market conditions permit.
CRESCENT POINT ENERGY CORP. | 13 |
12. | DEFICIT |
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Accumulated earnings (deficit) | (6,352.3 | ) | (4,028.3 | ) | ||
Accumulated gain on shares issued pursuant to DRIP (1) and SDP (2) | 8.4 | 8.4 | ||||
Accumulated tax effect on redemption of restricted shares | 12.1 | 12.1 | ||||
Accumulated dividends | (7,634.4 | ) | (7,629.1 | ) | ||
Deficit | (13,966.2 | ) | (11,636.9 | ) |
(1) | Premium Dividend TM and Dividend Reinvestment Plan. |
(2) | Share Dividend Plan. |
13. | CAPITAL MANAGEMENT |
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Long-term debt (1) | 2,539.2 | 2,905.1 | ||||
Adjusted working capital deficiency (2) | 190.5 | 126.1 | ||||
Unrealized foreign exchange on translation of US dollar long-term debt | (401.8 | ) | (265.9 | ) | ||
Net debt | 2,327.9 | 2,765.3 | ||||
Shareholders’ equity | 3,112.1 | 5,342.7 | ||||
Total capitalization | 5,440.0 | 8,108.0 |
(1) | Includes current portion of long-term debt. |
(2) | Adjusted working capital deficiency is calculated as accounts payable and accrued liabilities and long-term compensation liability, less cash, accounts receivable, prepaids and deposits and long-term investments. |
The following table reconciles cash flow from operating activities to adjusted funds flow from operations for the three months ended March 31, 2020 and March 31, 2019:
($ millions) | March 31, 2020 | March 31, 2019 | ||||
Cash flow from operating activities | 329.3 | 416.8 | ||||
Changes in non-cash working capital | (33.1 | ) | 91.0 | |||
Transaction costs | 4.7 | 0.9 | ||||
Decommissioning expenditures | 8.6 | 5.3 | ||||
Adjusted funds flow from operations | 309.5 | 514.0 |
Crescent Point's objective for managing its capital structure is to maintain a strong balance sheet and capital base to provide financial flexibility, position the Company to fund future development projects and provide returns to shareholders.
Crescent Point manages and monitors its capital structure and short-term financing requirements using a measure not defined in IFRS, the ratio of net debt to adjusted funds flow from operations. Net debt to adjusted funds flow from operations is used to measure the Company's overall debt position and to measure the strength of the Company's balance sheet. Crescent Point's objective is to manage this metric to be well positioned to execute its business objectives during periods of volatile commodity prices. Crescent Point monitors this ratio and uses this as a key measure in making decisions regarding financing, capital spending and dividend levels. The Company's net debt to adjusted funds flow from operations ratio at March 31, 2020 was 1.4 times (December 31, 2019 - 1.5 times).
Crescent Point is subject to certain financial covenants on its credit facilities and senior guaranteed notes agreements and was in compliance with all financial covenants as at March 31, 2020. See Note 8 - "Long-term Debt" for additional information regarding the Company's financial covenant requirements.
Crescent Point retains financial flexibility with significant liquidity on its credit facilities and no material near-term debt maturities. The Company is continuously monitoring the commodity price environment and will make further adjustments as needed to protect its balance sheet. The Company continues to actively manage its counterparty exposure and implement procedures to mitigate credit losses given the heightened risk exposure in the current environment.
14. | COMMODITY DERIVATIVE GAINS (LOSSES) |
Three months ended March 31 | ||||||
($ millions) | 2020 | 2019 | ||||
Realized gains | 56.3 | 11.6 | ||||
Unrealized gains (losses) | 258.6 | (172.8 | ) | |||
Commodity derivative gains (losses) | 314.9 | (161.2 | ) |
CRESCENT POINT ENERGY CORP. | 14 |
15. | INTEREST EXPENSE |
Three months ended March 31 | ||||||
($ millions) | 2020 | 2019 (1) (Revised) | ||||
Interest expense on long-term debt | 27.3 | 40.8 | ||||
Unrealized (gain) loss on CCS - Interest | (17.8 | ) | 9.1 | |||
Interest expense | 9.5 | 49.9 |
(1) | Comparative period revised to reflect current period presentation. Unrealized derivative gain (loss) on interest rate contracts previously included in derivative gains (losses). |
16. | FOREIGN EXCHANGE GAIN (LOSS) |
Three months ended March 31 | ||||||
($ millions) | 2020 | 2019 (1) (Revised) | ||||
Realized gain on CCS - Principal | 62.0 | 2.2 | ||||
Translation of US dollar long-term debt | (197.9 | ) | 94.5 | |||
Unrealized gain (loss) on CCS - Principal and foreign exchange swaps | 142.1 | (88.5 | ) | |||
Other | 2.6 | (0.5 | ) | |||
Foreign exchange gain | 8.8 | 7.7 |
(1) | Comparative period revised to reflect current period presentation. Unrealized derivative gain (loss) on CCS and foreign exchange swaps previously included in derivative gains (losses). |
17. | SHARE-BASED COMPENSATION |
The following table reconciles the number of restricted shares, Performance Share Units ("PSUs") and Deferred Share Units ("DSUs") for the three months ended March 31, 2020:
Restricted Shares | PSUs (1) | DSUs | |||||||
Balance, beginning of period | 3,636,194 | 2,920,444 | 319,891 | ||||||
Granted | 1,308,401 | 1,681,890 | 15,982 | ||||||
Redeemed | (1,784,750 | ) | — | — | |||||
Forfeited | (79,700 | ) | — | — | |||||
Balance, end of period | 3,080,145 | 4,602,334 | 335,873 |
(1) | Based on underlying units before any effect of performance multipliers. |
The following tables provide summary information regarding stock options outstanding as at March 31, 2020:
Stock Options (number of units) | Weighted average exercise price ($) | |||||
Balance, beginning of period | 2,833,342 | 7.59 | ||||
Expired | (85,293 | ) | 8.83 | |||
Balance, end of period | 2,748,049 | 7.55 |
Number of stock options outstanding | Weighted average exercise price per share for options outstanding ($) | Vest year | Weighted average remaining term (years) | Number of stock options exercisable | Weighted average exercise price per share for options exercisable ($) | ||||||||||
322,698 | 10.02 | 2019 | 4.80 | 322,698 | 10.02 | ||||||||||
549,610 | 7.55 | 2020 | 5.31 | 505,702 | 7.45 | ||||||||||
549,610 | 7.55 | 2021 | 5.31 | — | — | ||||||||||
872,307 | 8.46 | 2022 | 5.12 | — | — | ||||||||||
453,824 | 4.04 | 2023 | 6.02 | — | — |
CRESCENT POINT ENERGY CORP. | 15 |
18. | FINANCIAL INSTRUMENTS AND DERIVATIVES |
The Company's financial assets and liabilities are comprised of cash, accounts receivable, long-term investments, derivative assets and liabilities, accounts payable and accrued liabilities, and long-term debt.
a) Carrying amount and fair value of financial instruments
The fair value of cash, accounts receivable, and accounts payable and accrued liabilities approximate their carrying amount due to the short-term nature of those instruments. The fair value of the amounts drawn on bank credit facilities is equal to its carrying amount as the facilities bear interest at floating rates and credit spreads that are indicative of market rates. These financial instruments are classified as financial assets and liabilities at amortized cost and are reported at amortized cost.
Crescent Point's derivative assets and liabilities and long-term investments are transacted in active markets, classified as financial assets and liabilities at fair value through profit or loss and fair valued at each period with the resulting gain or loss recorded in net income.
At March 31, 2020, the senior guaranteed notes had a carrying value of $2.04 billion and a fair value of $1.81 billion (December 31, 2019 - $2.10 billion and $2.12 billion, respectively).
Derivative assets and liabilities
Derivative assets and liabilities arise from the use of derivative contracts. The Company's derivative financial instruments are classified as fair value through profit or loss and are reported at fair value with changes in fair value recorded in net income.
The following table summarizes the fair value as at March 31, 2020 and the change in fair value for the three months ended March 31, 2020:
($ millions) | Commodity contracts (1) | Interest contracts | CCS contracts (2) | Foreign exchange contracts | Total | ||||||||||
Derivative assets, beginning of period | 26.1 | 2.8 | 274.0 | 6.6 | 309.5 | ||||||||||
Unrealized change in fair value | 258.6 | (3.3 | ) | 160.0 | 3.2 | 418.5 | |||||||||
Derivative assets (liabilities), end of period | 284.7 | (0.5 | ) | 434.0 | 9.8 | 728.0 | |||||||||
Derivative assets, end of period | 284.7 | 0.5 | 434.0 | 10.2 | 729.4 | ||||||||||
Derivative liabilities, end of period | — | (1.0 | ) | — | (0.4 | ) | (1.4 | ) |
(1) | Includes oil contracts. |
(2) | Includes mark-to-market on principal and interest. |
b) | Risks associated with financial assets and liabilities |
The Company is exposed to financial risks from its financial assets and liabilities. The financial risks include market risk relating to commodity prices, interest rates and foreign exchange rates as well as credit and liquidity risk.
Commodity price risk
The Company is exposed to commodity price risk on crude oil, NGLs and natural gas revenues as well as power on electricity consumption. To manage a portion of this risk, the Company has entered into various derivative agreements.
The following table summarizes the unrealized gains (losses) on the Company's commodity financial derivative contracts and the resulting impact on income before tax due to fluctuations in commodity prices, with all other variables held constant:
Impact on Income Before Tax | Impact on Income Before Tax | |||||||||||
($ millions) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | ||||||||||
Increase 10% | Decrease 10% | Increase 10% | Decrease 10% | |||||||||
Commodity price | ||||||||||||
Crude oil | (32.0 | ) | 29.1 | (154.4 | ) | 134.3 | ||||||
Natural gas | — | — | (0.5 | ) | 0.5 |
Interest rate risk
The Company is exposed to interest rate risk on bank credit facilities to the extent of changes in market interest rates. Based on the Company's floating rate debt position as at March 31, 2020, a 1 percent increase or decrease in the interest rate on floating rate debt would amount to an impact on income before tax of $0.5 million for the three months ended March 31, 2020 (three months ended March 31, 2019 - $4.0 million).
CRESCENT POINT ENERGY CORP. | 16 |
The following table summarizes the unrealized gains (losses) on the Company's interest derivative contracts and the resulting impact on income before tax due to the respective changes in the applicable forward interest rates, with all other variables held constant:
Impact on Income Before Tax | Impact on Income Before Tax | |||||||||||
($ millions) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | ||||||||||
Forward interest rates | Increase 10% | Decrease 10% | Increase 10% | Decrease 10% | ||||||||
Interest rate swaps | 0.9 | (0.9 | ) | 1.0 | (1.0 | ) |
Foreign exchange risk
The Company is exposed to foreign exchange risk in relation to its US dollar denominated long-term debt, investment in U.S. subsidiaries and in relation to its crude oil sales. Crescent Point enters into various CCS and foreign exchange swaps to hedge its foreign exchange exposure on its US dollar denominated long-term debt. To partially mitigate the foreign exchange risk relating to crude oil sales, the Company has fixed crude oil contracts to settle in Cdn$ WTI.
The following table summarizes the resulting unrealized gains (losses) impacting income before tax due to the respective changes in the period end and applicable foreign exchange rates, with all other variables held constant:
Impact on Income Before Tax | Impact on Income Before Tax | ||||||||||||
($ millions) | Exchange Rate | Three months ended March 31, 2020 | Three months ended March 31, 2019 | ||||||||||
Cdn$ relative to US$ | Increase 10% | Decrease 10% | Increase 10% | Decrease 10% | |||||||||
US dollar long-term debt | Period End | 200.6 | (200.6 | ) | 368.1 | (368.1 | ) | ||||||
Cross currency swaps | Forward | (220.0 | ) | 220.0 | (392.1 | ) | 392.1 | ||||||
Foreign exchange swaps | Forward | (2.7 | ) | 2.7 | (3.9 | ) | 3.9 |
Credit risk
The Company is exposed to credit risk in relation to its physical oil and gas sales, financial counterparty and joint venture receivables. A substantial portion of the Company's accounts receivable are with customers in the oil and gas industry and are subject to normal industry credit risks. To mitigate credit risk associated with its physical sales portfolio, Crescent Point obtains financial assurances such as parental guarantees, letters of credit and third party credit insurance. Including these assurances, approximately 95 percent of the Company's oil and gas sales are with entities considered investment grade.
At March 31, 2020, approximately 2 percent (December 31, 2019 - 5 percent) of the Company's accounts receivable balance was outstanding for more than 90 days and the Company's average expected credit loss was 0.71 percent (December 31, 2019 - 0.60 percent) on a portion of the Company’s accounts receivable balance relating to joint venture receivables.
Liquidity risk
The Company manages its liquidity risk through managing its capital structure and continuously monitoring forecast cash flows and available credit under existing banking arrangements as well as other potential sources of capital.
At March 31, 2020, the Company had available unused borrowing capacity on bank credit facilities of approximately $2.51 billion, including $7.7 million outstanding letters of credit and cash of $19.6 million.
CRESCENT POINT ENERGY CORP. | 17 |
c) | Derivative contracts |
The following is a summary of the derivative contracts in place as at March 31, 2020:
Financial WTI Crude Oil Derivative Contracts – Canadian Dollar (1) | |||||||||||||||||
Swap | Three-way Collar | ||||||||||||||||
Term | Volume (bbls/d) | Average Price ($/bbl) | Volume (bbls/d) | Average Sold Call Price ($/bbl) | Average Bought Put Price ($/bbl) | Average Sold Put Price ($/bbl) | |||||||||||
2020 April - December | 20,798 | 68.30 | 36,662 | 82.04 | 76.01 | 62.26 | |||||||||||
2021 January - March | — | — | 5,000 | 78.87 | 73.50 | 63.50 |
(1) | The volumes and prices reported are the weighted average volumes and prices for the period. |
Financial Interest Rate Derivative Contracts – Canadian Dollar | Notional Principal ($ millions) | Fixed Rate (%) | |||
Term | Contract | ||||
April 2020 - March 2023 | Swap | 50.0 | 0.92 | ||
April 2020 - August 2023 | Swap | 50.0 | 0.81 | ||
April 2020 - August 2023 | Swap | 50.0 | 0.95 | ||
April 2020 - September 2023 | Swap | 50.0 | 0.95 | ||
April 2020 - August 2024 | Swap | 100.0 | 0.87 |
Financial Cross Currency Derivative Contracts | |||||||||||||
Term | Contract | Receive Notional Principal (US$ millions) | Fixed Rate (US%) | Pay Notional Principal (Cdn$ millions) | Fixed Rate (Cdn%) | ||||||||
April 2020 | Swap | 165.0 | 3.38 | 218.8 | 3.44 | ||||||||
April 2020 - April 2021 | Swap | 82.0 | 5.13 | 79.0 | 5.83 | ||||||||
April 2020 - June 2021 | Swap | 52.5 | 3.29 | 56.3 | 3.59 | ||||||||
April 2020 - May 2022 | Swap | 170.0 | 4.00 | 166.9 | 5.03 | ||||||||
April 2020 - April 2023 | Swap | 61.5 | 4.12 | 80.3 | 3.71 | ||||||||
April 2020 - June 2023 | Swap | 270.0 | 3.78 | 274.7 | 4.32 | ||||||||
April 2020 - June 2024 | Swap | 257.5 | 3.75 | 276.4 | 4.03 | ||||||||
April 2020 - April 2025 | Swap | 82.0 | 4.30 | 107.0 | 3.98 | ||||||||
April 2020 - April 2025 | Swap | 230.0 | 4.08 | 291.1 | 4.13 | ||||||||
April 2020 - April 2027 | Swap | 20.0 | 4.18 | 25.3 | 4.25 |
Financial Foreign Exchange Forward Derivative Contracts | |||||||||
Settlement Date | Contract | Receive Notional Principal (US$ millions) | Pay Notional Principal (Cdn$ millions) | ||||||
April 2020 | Swap | 5.5 | 8.0 | ||||||
April 2020 | Swap | 5.6 | 8.0 | ||||||
May 2022 | Swap | 30.0 | 32.2 |
CRESCENT POINT ENERGY CORP. | 18 |
19.COMMITMENTS
On January 20, 2020, Crescent Point closed the sale of certain gas infrastructure assets in Saskatchewan. In connection with the sale, the Company entered into a gas handling agreement that includes a long-term volume commitment.
At March 31, 2020, the Company had contractual obligations and commitments as follows:
($ millions) | 1 year | 2 to 3 years | 4 to 5 years | More than 5 years | Total | |||||||||||
Operating (1) | 5.4 | 9.8 | 12.1 | 36.1 | 63.4 | |||||||||||
Gas processing | 39.0 | 79.7 | 81.8 | 400.7 | 601.2 | |||||||||||
Transportation | 14.9 | 25.1 | 24.4 | 10.1 | 74.5 | |||||||||||
Capital | 2.3 | — | — | — | 2.3 | |||||||||||
Total contractual commitments (2) | 61.6 | 114.6 | 118.3 | 446.9 | 741.4 |
(1) | Includes operating costs on the Company's office space, net of $13.3 million recoveries from subleases |
(2) | Excludes contracts accounted for under IFRS 16. See Note 9 - "Leases" for additional information. |
20. SUPPLEMENTAL DISCLOSURES
Cash flow statement presentation
Three months ended March 31 | ||||||
($ millions) | 2020 | 2019 | ||||
Operating activities | ||||||
Changes in non-cash working capital: | ||||||
Accounts receivable | 99.2 | (135.3 | ) | |||
Prepaids and deposits | (5.6 | ) | (5.4 | ) | ||
Accounts payable and accrued liabilities | (49.8 | ) | 54.9 | |||
Other current liabilities | (1.7 | ) | (4.6 | ) | ||
Other long-term liabilities | (9.0 | ) | (0.6 | ) | ||
33.1 | (91.0 | ) | ||||
Investing activities | ||||||
Changes in non-cash working capital: | ||||||
Accounts receivable | 2.8 | 33.5 | ||||
Accounts payable and accrued liabilities | (19.0 | ) | 10.2 | |||
(16.2 | ) | 43.7 | ||||
Financing activities | ||||||
Changes in non-cash working capital: | ||||||
Accounts payable and accrued liabilities | — | (11.0 | ) |
CRESCENT POINT ENERGY CORP. | 19 |
Supplementary financing cash flow information
The Company's reconciliation of cash flow from financing activities is outlined in the table below:
($ millions) | Dividends payable | Long-term debt (1) | Lease liability (2) | |||||||
December 31, 2019 | 5.3 | 2,905.1 | 181.2 | |||||||
Changes from cash flow from financing activities: | ||||||||||
Decrease in bank debt, net | (337.5 | ) | ||||||||
Repayment of senior guaranteed notes | (224.4 | ) | ||||||||
Realized gain on cross currency swap maturity | 62.0 | |||||||||
Cash dividends paid | (5.3 | ) | ||||||||
Payments on principal portion of lease liability | (7.9 | ) | ||||||||
Non-cash changes: | ||||||||||
Cash dividends declared | 5.3 | |||||||||
Additions | 0.3 | |||||||||
Foreign exchange | 134.0 | 0.3 | ||||||||
March 31, 2020 | 5.3 | 2,539.2 | 173.9 | |||||||
December 31, 2018 (3) | 16.5 | 4,276.7 | 223.8 | |||||||
Changes from cash flow from financing activities: | ||||||||||
Decrease in bank debt, net | (39.8 | ) | ||||||||
Realized gain on cross currency swap maturity | 2.2 | |||||||||
Cash dividends paid | (16.6 | ) | ||||||||
Payments on principal portion of lease liability | (8.3 | ) | ||||||||
Non-cash changes: | ||||||||||
Cash dividends declared | 5.6 | |||||||||
Financing | 2.4 | |||||||||
Additions | 1.8 | |||||||||
Foreign exchange | (96.5 | ) | (0.1 | ) | ||||||
March 31, 2019 | 5.5 | 4,142.6 | 219.6 |
(1) | Includes current portion of long-term debt. |
(2) | Includes current portion of lease liability. |
(3) | Lease liability is as at January 1, 2019. |
21. GEOGRAPHICAL DISCLOSURE
The following table reconciles oil and gas sales by country and product type:
Three months ended March 31 | ||||||
($ millions) (1) | 2020 | 2019 | ||||
Canada | ||||||
Crude oil sales | 420.8 | 607.0 | ||||
NGL sales | 22.2 | 35.0 | ||||
Natural gas sales | 16.9 | 21.7 | ||||
Total Canada | 459.9 | 663.7 | ||||
U.S. | ||||||
Crude oil sales | 80.5 | 207.1 | ||||
NGL sales | 5.3 | 11.2 | ||||
Natural gas sales | 2.7 | 10.4 | ||||
Total U.S. | 88.5 | 228.7 | ||||
Total oil and gas sales | 548.4 | 892.4 |
(1) | Oil and gas sales are reported before realized derivatives. |
CRESCENT POINT ENERGY CORP. | 20 |
The following table reconciles non-current assets by country:
($ millions) | March 31, 2020 | December 31, 2019 | ||||
Canada | 5,756.9 | 8,121.9 | ||||
U.S. | 914.6 | 1,338.4 | ||||
Total | 6,671.5 | 9,460.3 |
CRESCENT POINT ENERGY CORP. | 21 |
Directors Barbara Munroe, Chair (6) Laura Cillis (1) (2) James Craddock (1) (3) (5) John Dielwart (3) (4) Ted Goldthorpe (1) (5) Mike Jackson (1) (2) (5) Jennifer Koury (2) (4) Francois Langlois (3) (4) (5) Craig Bryksa (4) (1) Member of the Audit Committee of the Board of Directors (2) Member of the Human Resources and Compensation Committee of the Board of Directors (3) Member of the Reserves Committee of the Board of Directors (4) Member of the Environmental, Health & Safety Committee of the Board of Directors (5) Member of the Corporate Governance and Nominating Committee (6) Chair of the Board serves in an ex officio capacity on each Committee Officers Craig Bryksa President and Chief Executive Officer Ken Lamont Chief Financial Officer Ryan Gritzfeldt Chief Operating Officer Brad Borggard Senior Vice President, Corporate Planning and Capital Markets Mark Eade Senior Vice President, General Counsel and Corporate Secretary Garret Holt Senior Vice President, Corporate Development Head Office Suite 2000, 585 - 8th Avenue S.W. Calgary, Alberta T2P 1G1 Tel: (403) 693-0020 Fax: (403) 693-0070 Toll Free: (888) 693-0020 Banker The Bank of Nova Scotia Calgary, Alberta | Auditor PricewaterhouseCoopers LLP Calgary, Alberta Legal Counsel Norton Rose Fulbright Canada LLP Calgary, Alberta Evaluation Engineers GLJ Petroleum Consultants Ltd. Calgary, Alberta Sproule Associates Ltd. Calgary, Alberta Registrar and Transfer Agent Investors are encouraged to contact Crescent Point's Registrar and Transfer Agent for information regarding their security holdings: Computershare Trust Company of Canada 600, 530 - 8th Avenue S.W. Calgary, Alberta T2P 3S8 Tel: (403) 267-6800 Stock Exchanges Toronto Stock Exchange - TSX New York Stock Exchange - NYSE Stock Symbol CPG Investor Contacts Brad Borggard Senior Vice President, Corporate Planning and Capital Markets (403) 693-0020 Shant Madian Vice President, Investor Relations and Corporate Communications (403) 693-0020 |
CRESCENT POINT ENERGY CORP. | 22 |