Crescent Point slices dividend

CALGARY • Crescent Point Energy Corp. cut its dividend for the first time in its 14-year history as it posted a large second-quarter loss and cut spending in the wake of collapsing energy prices.

Crescent Point, the largest oil producer in Saskatchewan, announced Thursday it was slicing its dividend 57 per cent to 10 cents per share — a move company executives had said they hoped to avoid.

Crescent Point president and CEO Scott Saxberg said in the last oil price downturn the company was still able to hedge its production at higher prices and avoid such drastic measures as cutting dividends, but that ability has disappeared over the past month. The current slide in prices, from roughly US$60 per barrel in May and June to close at US$42.23 on Thursday, has been “a bit of a shock,” he said.

“There’s such a dramatic difference in the forward strip pricing relative to 2008 and ‘09,” he said in an interview.

That drop, combined with the weak future pricing for the commodity, caused the company to take action when it announced its latest results.

The company posted a $240 million net loss in the three months ended June 30, down significantly from a profit of $98 million during the same period last year.

Its cash flow, a key energy measure of return, fell 18 per cent to $524 million.

“Just the difference between end of June pricing and our financial model relative to today, there was potential that if we stuck with our plan, we’d add over $500 million of additional debt,” Saxberg said.

Analysts had speculated recently that Crescent Point’s dividend level could become unsustainable, especially following the company’s acquisition of Legacy Oil and Gas Inc. for $1.5 billion in May and Coral Hill Energy Ltd. in July for $258 million. The company used its own shares in both of those transactions and took on both companies’ debts.

Multiple analysts cut their price targets for the company’s shares after Thursday’s earnings release.

“We considered delaying any dividend decision until the end of 2015. However, the risk of potentially increasing our debt should prices not recover is not something we were comfortable with,” Saxberg said in an earnings call.

“There is considerable

It was the right thing to do ... We continue to see long-term value

risk that commodity prices may be lower for longer,” he added.

Crescent Point’s shares opened up but slid later to finish the day at $17.58 per share, down 29 cents or 1.6 per cent.

“While some investors may be disappointed with the dividend cut, we believe it was the right thing to do and we continue to see significant long-term value from the ongoing development of (Crescent Point’s) extensive light oil asset base,” National Bank Financial analyst Kyle Preston wrote in a research note.

Crescent Point also slashed $100 million from its capital budget, which brought total planned spending to $1.45 billion for this year.

The spending c ut was largely a result of cost savings initiatives; the company has realized 20 per cent capital savings so far this year.

Saxberg also indicated that Crescent Point, which has been one of the more active buyers so far this year, would slow down its hunt for deals in the second half of the year.

“We’re going to be very patient in the next while here,” Saxberg said.

“We don’t really see a lot of opportunities.”

He also said the company would focus on growing production from its own projects, including by using more water floods to stimulate production from its wells. Water flooding is a technique used to pressurize declining oil reservoirs, forcing more oil to the surface.

The acquisitions of Legacy and Coral Hill give Crescent Point additional locations where it can use water floods to grow its production at a more cost-effective rate than drilling new wells.