Crescent Point Energy sells gas assets for $500M

Crescent Point Energy announced they have sold gas assets in Saskatchewan to Steel Reef Infrastructure Corp. for $500 million.

As part of the sale, the company will monetize nine natural gas gathering and processing facilities and two gas sales pipelines currently operating in Saskatchewan.

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These gas processing facilities and gas lines have a total throughput capacity of more than 90 million cubic feet of natural gas per day (MMcf/d), and do not include any oil-related infrastructure.

Under the terms of the sale, Crescent Point will enter into a take-or-pay commitment with Steel Reef, in exchange for Steel Reef granting Crescent Point processing rights at the facilities.

Steel Reef is a midstream company with other gas processing assets in Saskatchewan, and they will operate the assets. The expected cash flow to the purchaser is estimated at $47 million, excluding cash flow from third parties.

Steel Reef has committed to fund an upcoming 12 MMcf/d expansion of one of the gas processing facilities, which will reduce the need for capital to be spent by Crescent Point to do the work. Steel Reef’s cost to do the expansion is estimated at around $30 million, which will be in addition to the purchase price.

The facility expansion will begin in 2020 and will be completed within a year to year and a half following the close of the asset sale. The expansion is expected to enhance sales volumes of gas while also reducing the facility’s emissions intensity.

Crescent Point reported that they are also continuing negotiations for third party development of a new sales oil pipeline, which will enhance the company’s market access and realized pricing for its southeast Saskatchewan oil production.

The new sales oil pipeline will take about a year to construct and to bring into service, once the agreement is finalized.

With this sale of gas assets, Crescent Point expects that its net debt will be reduced from $2.8 billion to $2.3 billion. They will also use about $50 million from the sale to continue buying back shares. So far this year, as of Nov. 13, the company has repurchased about 16.3 million shares for cancellation.

With the sale of these assets, Crescent Point has sold, or is in the process of selling, about $1.45 billion of assets so far in 2019, as part of the company’s restructuring to improve their financial position.