Crescent Point CEO fighting for his job
Poor earnings set stage for proxy fight
CALGARY • One day before a major proxy fight for control of Crescent Point
Energy Corp., the light oil producer announced results that disappointed analysts and set the stage for a tense annual meeting.
“I think we had a really good quarter on the things we could control. I think the differentials were unexpectedly wider than we thought in the quarter,” Crescent Point president and CEO Scott Saxberg said following his company’s first quarter earnings call.
Calgary-based Crescent Point is the largest oil producer in Saskatchewan and, despite producing light oil, had to accept discounts for its barrels in the first quarter due to a lack of pipeline capacity to export Canadian oil.
Crescent Point’s shares slid more than 8 per cent to $10.32 on the market after the company posted a roughly $91 million net loss in the first quarter, a big reversal from the $119 million in earnings it reported at the same time a year earlier.
The loss also set off a new wave of criticism about the producer and calls for change at the company’s upcoming annual shareholders’ meeting. Saxberg said he couldn’t discuss the upcoming vote at his company’s annual meeting Friday for legal reasons but did say the drawn out proxy fight with Cation Capital Inc. has been a teachable moment for the company.
“We’ve learned a lot through this process. We understand and accept the feedback and expectation,” he said.
“We’ll make further changes to improve our share price,” Saxberg said.
Saxberg’s job is in the crosshairs of Cation Capital, a private firm comprised of well-known investment bankers in Calgary, which has also put forward a slate of directors.
“Crescent Point’s continued dismal results this morning add urgency to our call for change,” Cation Capital president Sandy Edmonstone said in a release. “They are further proof that the company’s ‘strategy’ is fundamentally flawed and that the current board is unable to set a new course or rein in the current CEO.”
Despite the calls for change, a report from Reuters citing unnamed sources this week has Crescent Point’s slate of directors poised to beat out activist Cation Capital’s nominees after a preliminary vote count.
Cation Capital spokesperson Dan Gagnier said “there was a large amount of share movement leading up to the deadline. The vote is too close to call and any representation otherwise is false.”
Some financial analysts, however, expect Crescent Point’s slate of directors to win.
“I don’t really think there’s going to be much in the way of change. They don’t own much of a stake,” said Edward Jones senior analyst Jennifer Rowland, referring to Cation Capital’s 0.3-percent ownership of Crescent Point’s shares.
Still, she said, Crescent Point needs to make some changes to the way it communicates and to its operations to regain investor confidence. Rowland currently has a “hold” rating on the stock and said she thinks the market values it fairly.
“I don’t know if it’s a management issue or an asset issue. When it comes down to it, the key growth asset for them is going to be the Uinta basin in Utah,” she said, adding analysts and investors have significantly less information about the play than, by contrast, the Permian basin in Texas.
“It’s hard to have a lot of confidence that growth there is sustainable because that area is still being proven,” she said.
Saxberg conceded that the company needs to show more data on its production from the Uinta basin, where the company’s production reached 21,820 barrels of oil equivalent per day in the first quarter — a 69-per-cent increase on the 12,891 barrels of oil equivalent per day it produced last year.
Overall, the company’s production grew three per cent to 178,418 boed in the first quarter.
Other analysts have criticized the company’s capital budget, and Saxberg said the company is taking steps to reduce spending.
He also noted that Crescent Point, like its peers, always spends heavily in the first quarter ahead of a seasonal slowdown in the Canadian oilfield called “spring breakup.”
“We’re getting beat up on capital spend,” Saxberg said. “We recognize that people are ultra-focused on capital spend. The $25-million capital reduction should highlight to people that we’re focused on this.”
Finally, Crescent Point has also been under pressure to sell off assets and pay down debt. To that end, the company announced $225 million in upcoming asset sales on Thursday but did not provide details on what assets were being sold.
“We view this as a modest positive, as it demonstrates continued progress with the company’s disposition program and efforts to reduce debt,” Canaccord Genuity analyst Anthony Petrucci said in a note, in which he also highlighted the company’s cash flow missed targets.
In absorbing all of the criticism, Saxberg said he thinks Crescent Point can turn a corner.
“We understand and accept the feedback that shareholders have of us, and we’re gong to focus to meet or exceed those expectations and move forward positively as a company,” he said. “We want to turn the noise into a positive.”
A vote on Friday morning will determine if he gets the chance to do so.
CRESCENT POINT’S CONTINUED DISMAL RESULTS THIS MORNING ADD URGENCY TO OUR CALL FOR CHANGE. — SANDY EDMONSTONE