Crescent Point Energy Corp.
Supplemental Disclosures about Extractive Activities - Oil & Gas (unaudited)
December 31, 2016
The following disclosures have been prepared by Crescent Point Energy Corp. ("Crescent Point" or the "Company") in accordance with Accounting Standards Codification 932 "Extractive Activities — Oil & Gas" ("ASC 932") issued by the Financial Accounting Standards Board ("FASB") and where applicable, financial information is prepared in accordance with International Financial Reporting Standards (“IFRS”).
For the years ended December 31, 2016 and 2015 the Company filed its reserves information under National Instrument 51-101 – “Standards of Disclosure of Oil and Gas Activities” (“NI 51-101”), which prescribes the standards for the preparation and disclosure of reserves and related information for companies listed in Canada.
There are significant differences to the type of volumes disclosed and the basis from which the volumes are economically determined under the United States Securities and Exchange Commission (“SEC”) requirements and NI 51-101. The SEC requires disclosure of net reserves, after royalties, using trailing 12-month average prices and current costs; whereas NI 51-101 requires Company gross reserves, before royalties, using forecast pricing and costs. Therefore the difference between the reported numbers under the two disclosure standards can be material.
Petroleum and Natural Gas Reserve Information
Proved petroleum and natural gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids ("NGL") that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.
Proved developed petroleum and natural gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, which may require future expenditures. Additional future expenditures would be minor compared to the cost of drilling a new well.
Proved undeveloped petroleum and natural gas reserves are reserves that are expected to be recovered from known accumulations where significant future expenditure is required.
Reserves are estimated quantities of crude oil, NGLs and natural gas anticipated from geological and engineering data to be recoverable from known accumulations, from a given date forward, by known technology, under existing operating conditions and considered to be economic at average commodity prices based upon the prior 12-month period. Estimates of petroleum and natural gas reserves are subject to uncertainty and will change as additional information regarding the producing fields and technology becomes available and as future economic conditions change. Net reserves presented in this section represent the Company's working interest and overriding royalty share of the gross remaining reserves, after deduction of any crown, freehold and overriding royalties. Such royalties are subject to change by legislation or regulation and can also vary depending on production rates, selling prices and timing of initial production.
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| CRESCENT POINT ENERGY CORP. | 1 |
The changes in Crescent Point's net proved crude oil, NGL and natural gas reserves under constant prices and costs for the two-year period ended December 31, 2016 were as follows: |
| | | | | | | | | | | | | | | | | | | | |
| | Canada | | United States | | Total |
Net Proved Reserves (1) | Crude Oil & NGLs (Mbbls) | Natural Gas (MMcf) | Total (Mboe) | | Crude Oil & NGLs (Mbbls) | Natural Gas (MMcf) | Total (Mboe) | | Crude Oil & NGLs (Mbbls) | Natural Gas (MMcf) | Total (Mboe) |
| December 31, 2014 | 382,859 |
| 158,678 |
| 409,305 |
| | 55,120 |
| 49,281 |
| 63,333 |
| | 437,979 |
| 207,959 |
| 472,638 |
|
| Revisions of previous estimates | (52,582 | ) | 25,389 |
| (48,351 | ) | | (20,974 | ) | (8,476 | ) | (22,386 | ) | | (73,556 | ) | 16,914 |
| (70,737 | ) |
| Improved recovery | 14,128 |
| 3,302 |
| 14,678 |
| | 1,904 |
| - |
| 1,904 |
| | 16,033 |
| 3,302 |
| 16,583 |
|
| Purchases of reserves in place | 34,568 |
| 16,647 |
| 37,343 |
| | 1,968 |
| - |
| 1,968 |
| | 36,536 |
| 16,647 |
| 39,311 |
|
| Extensions and discoveries | 8,797 |
| 2,248 |
| 9,172 |
| | 2,285 |
| - |
| 2,285 |
| | 11,082 |
| 2,248 |
| 11,457 |
|
| Production | (40,259 | ) | (25,671 | ) | (44,537 | ) | | (5,163 | ) | (5,398 | ) | (6,063 | ) | | (45,422 | ) | (31,068 | ) | (50,600 | ) |
| Sales of reserves in place | (51 | ) | - |
| (51 | ) | | (46 | ) | - |
| (46 | ) | | (98 | ) | - |
| (98 | ) |
| December 31, 2015 | 347,460 |
| 180,593 |
| 377,559 |
| | 35,094 |
| 35,408 |
| 40,995 |
| | 382,554 |
| 216,001 |
| 418,554 |
|
| Revisions of previous estimates | (6,638 | ) | 24,313 |
| (2,586 | ) | | (5,882 | ) | 3,317 |
| (5,329 | ) | | (12,520 | ) | 27,630 |
| (7,915 | ) |
| Improved recovery | 11,789 |
| 6,478 |
| 12,869 |
| | 549 |
| 274 |
| 595 |
| | 12,338 |
| 6,753 |
| 13,464 |
|
| Purchases of reserves in place | 7,395 |
| 1,020 |
| 7,565 |
| | 269 |
| 3,163 |
| 796 |
| | 7,664 |
| 4,183 |
| 8,361 |
|
| Extensions and discoveries | 7,121 |
| 2,090 |
| 7,470 |
| | 2,145 |
| 950 |
| 2,304 |
| | 9,267 |
| 3,040 |
| 9,773 |
|
| Production | (42,704 | ) | (28,660 | ) | (47,481 | ) | | (4,451 | ) | (5,366 | ) | (5,346 | ) | | (47,156 | ) | (34,027 | ) | (52,827 | ) |
| Sales of reserves in place | (1,734 | ) | (4,791 | ) | (2,533 | ) | | (5 | ) | (3 | ) | (5 | ) | | (1,739 | ) | (4,795 | ) | (2,539 | ) |
| December 31, 2016 | 322,689 |
| 181,042 |
| 352,862 |
| | 27,719 |
| 37,743 |
| 34,009 |
| | 350,407 |
| 218,785 |
| 386,872 |
|
| | | | | | | | | | | |
| Net Proved Developed Reserves | | | | | | | | | | |
| December 31, 2014 | 240,806 |
| 103,109 |
| 257,990 |
| | 23,213 |
| 19,522 |
| 26,466 |
| | 264,019 |
| 122,631 |
| 284,457 |
|
| December 31, 2015 | 247,126 |
| 135,553 |
| 269,718 |
| | 18,950 |
| 18,103 |
| 21,968 |
| | 266,077 |
| 153,655 |
| 291,686 |
|
| December 31, 2016 | 233,118 |
| 134,032 |
| 255,457 |
| | 19,301 |
| 24,586 |
| 23,399 |
| | 252,419 |
| 158,618 |
| 278,856 |
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| Net Proved Undeveloped Reserves | | | | | | | | | | |
| December 31, 2014 | 142,053 |
| 55,569 |
| 151,314 |
| | 31,907 |
| 29,759 |
| 36,867 |
| | 173,960 |
| 85,328 |
| 188,181 |
|
| December 31, 2015 | 100,334 |
| 45,040 |
| 107,841 |
| | 16,143 |
| 17,305 |
| 19,028 |
| | 116,478 |
| 62,345 |
| 126,869 |
|
| December 31, 2016 | 89,570 |
| 47,010 |
| 97,405 |
| | 8,418 |
| 13,157 |
| 10,611 |
| | 97,988 |
| 60,167 |
| 108,016 |
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Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Petroleum and Natural Gas Reserves
The following information has been developed utilizing procedures prescribed by ASC 932, as updated by Accounting Standards Update 2010-03 "Oil and Gas Reserve Estimation and Disclosures", and based on crude oil, NGL and natural gas reserve and production volumes estimated by Crescent Point's independent reserves evaluators, GLJ Petroleum Consultants Ltd. and Sproule Associates Limited. The methodology used in calculating our price and cost assumptions for the standardized measure of discounted future net cash flows for reserve estimation is based upon the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period.
Future production and development costs are based on constant price assumptions and assume the continuation of existing economic, operating and regulatory conditions. Future income taxes are calculated by applying statutory income tax rates to future pre-tax cash flows after provision for the tax cost of the petroleum and natural gas properties based upon existing laws and regulations. A 10% discount factor was applied to the future net cash flows.
The information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the standardized measure of discounted future net cash flows be viewed as representative of the fair market value of Crescent Point's petroleum and natural gas properties. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The prescribed discount rate of 10% may not appropriately reflect interest rates.
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| CRESCENT POINT ENERGY CORP. | 2 |
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| Commodity Pricing | | 2016 |
| | 2015 |
| |
| WTI at Cushing Oklahoma ($US/bbl) | | 42.65 |
| | 50.28 |
| |
| Edmonton ($Cdn/bbl) | | 52.12 |
| | 58.81 |
| |
| Exchange Rate ($US/$Cdn) | | 0.7560 |
| | 0.7866 |
| |
| AECO/NIT Spot ($Cdn/MMBTU) | | 2.18 |
| | 2.68 |
| |
| Henry Hub NYMEX ($US/MMBTU) | | 2.49 |
| | 2.63 |
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The standardized measure of discounted future net cash flows relating to net proved oil, NGL and natural gas reserves are as follows: |
| | | | | | | | |
December 31, 2016 (millions of Canadian dollars) (1) | Canada | | United States | | Total |
| Future cash inflows | 14,026 |
| | 1,215 |
| | 15,241 |
|
| Future production costs | (6,671 | ) | | (635 | ) | | (7,305 | ) |
| Future development costs and asset retirement obligations | (2,316 | ) | | (233 | ) | | (2,549 | ) |
| Future income taxes | - |
| | (25 | ) | | (25 | ) |
| Future net cash flows | 5,039 |
| | 323 |
| | 5,362 |
|
| Deduct: 10% annual discount factor for timing of future cash flows | (1,656 | ) | | (108 | ) | | (1,764 | ) |
| Standardized measure of future net cash flows | 3,383 |
| | 215 |
| | 3,598 |
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December 31, 2015 (millions of Canadian dollars) (1) | Canada | | United States | | Total |
| Future cash inflows | 17,037 |
| | 1,699 |
| | 18,736 |
|
| Future production costs | (7,524 | ) | | (795 | ) | | (8,319 | ) |
| Future development costs and asset retirement obligations | (2,696 | ) | | (423 | ) | | (3,118 | ) |
| Future income taxes | (43 | ) | | (24 | ) | | (66 | ) |
| Future net cash flows | 6,774 |
| | 458 |
| | 7,232 |
|
| Deduct: 10% annual discount factor for timing of future cash flows | (2,277 | ) | | (181 | ) | | (2,458 | ) |
| Standardized measure of future net cash flows | 4,497 |
| | 277 |
| | 4,774 |
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| CRESCENT POINT ENERGY CORP. | 3 |
Reconciliation of Changes in Standardized Measure of Future Net Cash Flows Discounted at 10% per Year Relating to Proved Petroleum and Natural Gas Reserves |
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December 31, 2016 (millions of Canadian dollars) (1) | Canada | | United States | | Total |
| Balance, beginning of year | 4,497 |
| | 277 |
| | 4,774 |
|
Sales, net of production costs and royalties | (1,235 | ) | | (128 | ) | | (1,363 | ) |
| Net change in prices and royalties related to forecast production | (1,064 | ) | | (95 | ) | | (1,159 | ) |
| Development costs incurred during the period | 967 |
| | 117 |
| | 1,083 |
|
| Changes in estimated future development costs | (760 | ) | | 11 |
| | (749 | ) |
| Extensions, discoveries and improved recovery, net of related costs | 195 |
| | 20 |
| | 215 |
|
| Technical reserve revisions | 249 |
| | (18 | ) | | 230 |
|
Purchases of reserves in place | 73 |
| | 5 |
| | 78 |
|
| Sales of reserves in place | (24 | ) | | - |
| | (24 | ) |
Accretion of discount | 453 |
| | 29 |
| | 482 |
|
| Net change in income taxes | 33 |
| | (3 | ) | | 30 |
|
| Balance, end of year | 3,383 |
| | 215 |
| | 3,598 |
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December 31, 2015 (millions of Canadian dollars) (1) | Canada | | United States | | Total |
| Balance, beginning of year | 9,161 |
| | 1,168 |
| | 10,329 |
|
Sales, net of production costs and royalties | (1,358 | ) | | (161 | ) | | (1,519 | ) |
| Net change in prices and royalties related to forecast production | (7,211 | ) | | (991 | ) | | (8,202 | ) |
| Development costs incurred during the period | 1,173 |
| | 275 |
| | 1,448 |
|
| Changes in estimated future development costs | 164 |
| | 196 |
| | 360 |
|
| Extensions, discoveries and improved recovery, net of related costs | 260 |
| | 24 |
| | 285 |
|
| Technical reserve revisions | (1,357 | ) | | (383 | ) | | (1,739 | ) |
Purchases of reserves in place | 407 |
| | 11 |
| | 419 |
|
| Sales of reserves in place | (1 | ) | | - |
| | (1 | ) |
Accretion of discount | 1,132 |
| | 120 |
| | 1,252 |
|
| Net change in income taxes | 2,125 |
| | 18 |
| | 2,143 |
|
| Balance, end of year | 4,497 |
| | 277 |
| | 4,774 |
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Capitalized Costs Relating to Petroleum and Natural Gas Producing Activities |
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As at December 31, 2016 (millions of Canadian dollars) | Canada | | United States | | Total |
| Proved properties | 21,787 |
| | 3,061 |
| | 24,848 |
|
| Unproved properties | 1,469 |
| | 611 |
| | 2,080 |
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| Total capital costs | 23,256 |
| | 3,672 |
| | 26,928 |
|
| Accumulated depletion, amortization and impairment | (10,412 | ) | | (1,906 | ) | | (12,318 | ) |
| Net capitalized costs | 12,844 |
| | 1,766 |
| | 14,610 |
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As at December 31, 2015 (millions of Canadian dollars) | Canada | | United States | | Total |
| Proved properties | 20,686 |
| | 2,991 |
| | 23,677 |
|
| Unproved properties | 1,356 |
| | 606 |
| | 1,962 |
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| Total capital costs | 22,042 |
| | 3,597 |
| | 25,639 |
|
| Accumulated depletion, amortization and impairment | (8,370 | ) | | (1,846 | ) | | (10,216 | ) |
| Net capitalized costs | 13,672 |
| | 1,751 |
| | 15,423 |
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| CRESCENT POINT ENERGY CORP. | 4 |
Costs Incurred in Petroleum and Natural Gas Property Acquisitions, Exploration and Development Activities |
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As at December 31, 2016 (millions of Canadian dollars) | Canada | | United States | | Total |
| Property acquisition costs | | | | | |
| Proved properties | 156 |
| | 8 |
| | 164 |
|
| Unproved properties | 58 |
| | 5 |
| | 63 |
|
| Development costs | 966 |
| | 117 |
| | 1,083 |
|
| Exploration costs | 28 |
| | 28 |
| | 56 |
|
| Total | 1,208 |
| | 158 |
| | 1,366 |
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As at December 31, 2015 (millions of Canadian dollars) | Canada | | United States | | Total |
| Property acquisition costs | | | | | |
| Proved properties | 1,526 |
| | 72 |
| | 1,598 |
|
| Unproved properties | 163 |
| | (1 | ) | | 162 |
|
| Development costs | 1,173 |
| | 275 |
| | 1,448 |
|
| Exploration costs | 94 |
| | 20 |
| | 114 |
|
| Total | 2,956 |
| | 366 |
| | 3,322 |
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(1) Costs incurred exclude capitalized administration.
Results of Operations From Crude Oil and Natural Gas Producing Activities |
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For the year ended December 31, 2016 (millions of Canadian dollars) | Canada | | United States | | Total |
| Petroleum and natural gas revenues, net of royalties | 1,971 |
| | 214 |
| | 2,185 |
|
| Less: | | | | | |
| Operating expenses | 611 |
| | 81 |
| | 692 |
|
| Transportation expenses | 125 |
| | 5 |
| | 130 |
|
| Depletion, amortization and impairment | 2,098 |
| | 113 |
| | 2,211 |
|
| Accretion on decommissioning liability | 25 |
| | 1 |
| | 26 |
|
| Operating income (loss) | (888 | ) | | 14 |
| | (874 | ) |
| Income taxes (recovery) | - |
| | - |
| | - |
|
| Results of operations | (888 | ) | | 14 |
| | (874 | ) |
|
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For the year ended December 31, 2015 (millions of Canadian dollars) | Canada | | United States | | Total |
| Petroleum and natural gas revenues, net of royalties | 2,096 |
| | 268 |
| | 2,364 |
|
| Less: | | | | |
|
| Operating expenses | 609 |
| | 98 |
| | 707 |
|
| Transportation expenses | 129 |
| | 9 |
| | 138 |
|
| Depletion, amortization and impairment | 2,410 |
| | 720 |
| | 3,130 |
|
| Accretion on decommissioning liability | 24 |
| | 1 |
| | 25 |
|
| Operating income (loss) | (1,076 | ) | | (560 | ) | | (1,636 | ) |
| Income taxes | (2 | ) | | - |
| | (2 | ) |
| Results of operations | (1,074 | ) | | (560 | ) | | (1,634 | ) |
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| CRESCENT POINT ENERGY CORP. | 5 |
