Crescent Point Energy Corp slashes dividend, as oil plunge forces $589-million charge in Q4

CALGARY – Crescent Point Energy Corp., the largest oil producer in Saskatchewan, cut its dividend and pared back its spending plans Wednesday because it took a $589 million charge caused by the collapse in oil prices.

The company took the impairment charge on its assets because of the plunge in oil prices and bleak forecasts for future prices.

The charge pushed Crescent Point to a $382 million net reduction in your fourth quarter, when compared with earnings of $121 million the same time frame last year.

Crescent Point president and CEO Scott Saxberg said on an earnings call the company has been “very conservative” in booking oil reserves. “We have low-risk reserves left to book,” he explained.

Despite the large charge, the business’s chief operating officer Neil Smith said Crescent Point could be profitable at current oil prices. Free airline Texas Intermediate benchmark price closed at US$38.31 per barrel on Wednesday, up US$1.81.

“At $25, I’m still earning money. In the low $20s, I’m still making money,” Smith said.

Still, the Calgary-based company cut its monthly dividend to three cents per share from 10 cents beginning this month. The move is expected in order to save Crescent Point a further $430 million each year, because it is constantly on the cut its costs.

Smith said Crescent Point has also approached the oilfield service companies employed by the organization and asked to see their books, in an effort to further drive down costs through its very own logistics and people of their providers.

Unconventional oil and gas producers across Western Canada happen to be slashing their capital budgets and aggressively cutting costs because the oil price rout drags on.

Seven Generations Energy Ltd., which produces gas in northwestern Alberta and northeastern British Columbia, announced Wednesday it had reduced its drilling costs by 24 percent during the period of 2015, whilst reducing its costs to frack wells by 26 percent.

Seven Generations president and CEO Pat Carlson said he thinks over fifty percent of the costs the organization has cut through the downturn is going to be sustainable if oil prices rise.

At the moment, Carlson said, oilfield service companies – like drilling companies and hydraulic fracturing companies – are “bidding lower and lower” on jobs.

The Calgary-based company was able to beat analysts’ expectations for cash flow in the fourth quarter, even though it did post a $28 million net reduction in the quarter, in contrast to net earnings of $68 million at the same time a year earlier.

Both Seven Generations and Crescent Point plan to cut back this season as gas and oil prices are forecasted to remain low.

Crescent Point now expects to spend $950 million over the course of 2016, compared with a preliminary estimate between $950 million and $1.3 billion. Most of that money is allocated the 2nd 1 / 2 of the year, if this is going to be used to bring more oil on-stream for the coming year.

“We view the budget and dividend cuts like a prudent and good plan, and one which will ensure (Crescent Point) manages through the downturn while waiting to resume growth when oil prices recover,” National Bank Financial analyst Kyle Preston said inside a research note.

gmorgan@nationalpost.com

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