Jul 26, 2018
Executives
Brad Borggard - Senior Vice President, Corporate Planning and Capital Markets Craig Bryksa - Interim President and Chief Executive Officer Ken Lamont - Chief Financial Officer Ryan Gritzfeldt - Chief Operating Officer
Analysts
Operator
Good morning, ladies and gentlemen. My name is Candice, and I will be your conference operator for Crescent Point Energy's Second Quarter 2018 Conference Call.
This conference call is bring recorded today and will be webcast along with the slide deck, which can be found on Crescent Point’s website at www.crescentpointenergy.com by clicking on Conference Calls & Webcast under the Invest heading. The webcast maybe not be recorded or rebroadcast without the expressed consent of Crescent Point Energy.
All amounts discussed today are in Canadian dollars, unless otherwise stated. The complete financial statements and management’s discussion and analysis for period ending June 30, 2018, were announced this morning and are available on Crescent Point’s website and on the SEDAR and EDGAR websites.
All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session for members of the investment community [Operator Instructions] Thank you.
During the call, management may make projections or other forward-looking statements regarding future events or future financial performance. Actual performance, events or results may differ materially.
Additional information or factors that could affect Crescent Point’s operations or financial results are included in Crescent Point’s most recent Annual Information Form, which may be accessed through Crescent Point’s website, the SEDAR website, the EDGAR website or by contacting Crescent Point Energy. Management also calls your attention to the forward-looking information and non-GAAP measures sections of the press release issued earlier today.
I will now turn the call over to Brad Borggard, Senior Vice President, Corporate Planning and Capital Markets. Please go ahead, Mr.
Borggard.
Brad Borggard
Thank you, operator. I would like to welcome everyone to our second quarter 2018 conference call.
With me are Craig Bryksa, Interim President and Chief Executive Officer, Ken Lamont, Chief Financial Officer; and Ryan Gritzfeldt, Chief Operating Officer. As the operator highlighted, this conference call is being webcast along with the slide deck which can be found on Crescent Point’s website by clicking first on the Conference Call and Webcast, and then under the Invest heading.
As you'll hear about in the call, our team is focused on ongoing comprehensive review of Crescent Point’s asset base, business strategy and organizational structure. As a result, today’s call and question and answer session will be focused on our second quarter results with an update on our initial near-term progress and a summary of the longer-term goals the new senior leadership team is focused on.
We intend to communicate the results of our review process as soon as we can. Before I hand things over to Craig, I’d also like to comment on the letter issued on July 25 by Cation Capital.
As our shareholders know, we are always open to ideas and feedback. The new team brings fresh perspectives with respect to the go forward strategy and not listening to new ideas would be counterproductive.
That being said, we don’t engage with any shareholder during our official quiet period which take place prior to the issuance of our quarterly results. We do not believe it is in shareholder’s interest for us to spend our time and resources having a public exchange with Cation.
Our focus remains on the business and optimizing our strategy. With that, I’ll now turn things over to Craig.
Craig Bryksa
Thank you Brad, and thank you everyone for joining us today on the call. Well, this is my first conference call as the Interim President and CEO of Crescent Point.
I’m quite familiar with the company and excited to help ushered into a new chapter. Having been with Crescent Point for over the last 12 years, I’ve overseen the operating activities of each of the company’s main areas, and by doing so, I have gained a deep understanding of our asset base.
Crescent Point has great assets, a talented staff and I expect that we will deliver even stronger results for our shareholders. As part of our transition plan, we have established a new senior leadership team with strong technical and financial skills.
I will be working with this team to asses and optimize the future strategic direction of the company. I’ll speak for the team here and say that we are all taking a new fresh -- refreshed approach as we conduct our full review of the business.
As part of our transition period, we are examining our asset base, business strategy and organizational structure with the focus on key value drivers including balance sheet improvements, disciplined capital allocation and cost reductions. We expect these drivers to result in improved rates of return, free cash flow generation, debt adjusted per share metrics and long-term sustainability.
Crescent Point recognizes the investment community requires more detail on these plans and we intend to communicate these results of our review process as quickly as possible. Although, we are focused on our comprehensive review, we have identified some intermediate opportunities for change tied to our key value drivers.
We ensured proceeds from the recent dispositions were allocated to reduce debt instead of additional volume growth. This helped supports our total net debt reduction in the quarter of over $390 million.
We identified and took action to shut in uneconomic production as we focused on returns versus growth for the sake of growth. And we rescheduled the remainder of our 2018 capital program which allows for a more consistent level of activity and production profile moving into 2019.
As a result, a portion of the previously allocated third quarter 2018 capital expenditures will now be moved to later in the year and production volumes that were previously forecast to come on stream earlier in the second half of 2018 will also be moved to later in the year or into the first quarter of 2019. These decisions align with our mindset of living within our means and prioritizing returns and stability over short-term growth.
During the quarter, Crescent Point also streamlined its executive structure and reduced the size of the executive team. My new team and I are focused on ensuring we are as efficient as possible in all facets of our business and continue to review our organizational structure to identify areas for improvements throughout the company.
I'd now like to pass things over to Ken and Ryan to discuss our quarterly highlights. Ken?
Ken Lamont
Thanks, Craig. During the second quarter Crescent Point had very strong financial results.
We generated fund flow of over $500 million or $0.91 per share fully diluted, driven by strong operating net backs of $40.74 per BOE. Fund flow during the second quarter included onetime charges of $13.5 million related to executive departures and we reduced our net debt by over $390 million driven by excess free cash flow and proceeds from approximately $280 million of recent disposition.
We renewed our covenant base unsecured credit facilities totaling $3.6 billion with the maturity date extension to June 2021. We successfully closed a private placement of senior guarantee long-term notes which carry attractive coupon rates.
The proceeds from the private placement were used to repay outstanding bank debt and other near-term senior guaranteed notes. Our debt profile continues to have no material near-term debt maturities.
As of July 20, 2018, Crescent Point had on average over 40% of its oil and liquid production, net of royalty interest, hedged through the remainder of 2018 and 2019 at a weighted average market value price of approximately CAD 77 per barrel. Our hedging policy is in place to protect our cash flows and balance sheet and this is one of the financial levers in addition to disposition, we can use to improve our financial flexibility.
We will continue to manage such risks rather than speculate on commodity prices. I will now pass things over to Ryan to discuss our operational highlights.
Ryan?
Ryan Gritzfeldt
Thank you, Ken. Our second quarter production average 181,818 BOE per day, weighted approximately 90% to oil and liquids.
As is the norm with spring breakup seasonality, our second quarter activity in Canada was limited. This drove total capital expenditures in the quarter of $313.6 million with $238.6 million spent on drilling and development activities, including drilling 54 gross or 36 net well.
Our US operations continue to advance in Uinta Basin in North Dakota with horizontal developments across multiple zones. In the Uinta Basin our program remains active with one and two mile horizontal development showing ongoing success in the newer Wasatch and Uteland Butte zones.
We continue to monitor the strong results achieved from our recent stock development program, which targeted the the Castle Peak, Uteland Butte and Wasatch zones in the same drill spacing unit. And we will continue to allocate capital based on returns, stage of delineation and differentials.
In the emerging East Shale Duvernay play, we completed our for half 2018 drilling program of four net operated wells and two gross or one net non-operated well, all with encouraging initial results. We plan to drill one operated well in the play during the second half 2018, while also participating in some non-operated wells.
We will continue to monitor well performance before increasing the amount of capital allocated to this early stage resource play. As we review our asset base and business strategy, we will be examining our operations, seeking further improvements in our operating cost, efficiencies and capital allocation processes.
I’ll now pass things over to Brad to discuss our updated guidance for 2018.
Brad Borggard
Thanks Ryan. We’ve adjusted our annual production guidance for 2018 to 177,000 BOE per day average from 181,000 BOE per day, for approximately 2%.
This change reflects a shut-in of 1,000 BOE per share of uneconomic production and the rescheduling of our activity program, whereby we moved a portion of our remaining 2018 capital budget to the later portion of the year. As a result, production is scheduled to on line during the second half of 2018 will now be pushed into the later part of the year or into Q1 of 2019.
Our goal in rescheduling a part of the capital program is to allow for more consistent levels of activity into 2019 without requiring additional capital expenditures to be incurred in 2018. We believe maintaining a consistent level of activity, excluding periods for normal seasonality, provides cost, staffing, logistics and safe operations benefits to the company.
Going forward, Crescent Point intends to allocate capital in a manner designed to achieve consistent levels of activity. These changes, albeit small, highlight our focus on return and living within cash flow versus chasing production.
I will now hand things over to Craig for closing remarks.
Craig Bryksa
Thank you, Brad. I would like to thank the investment community for your patience as we conduct our business review as part of our transition plan.
My team and I take great pride in the company and want to ensure that the appropriate time is taken to set the right direction for Crescent Point's next chapter. Before I close, I would also like to thank our employees for their hard work, support and commitment.
At this point, we’re ready to answer questions from members of the investment community. I’ll now turn it back to the operator.
Operator
Craig Bryksa
Thank you everyone.
Operator
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect.
Everyone have a great day.