In a bid to recover from a share price slump, the Alberta-based oil producer Crescent Point Energy Corp. revealed a strategic plan that involves an organizational restructuring that would reduce its workforce by 17%, among other moves. The company also appointed a new chairman and CEO.
Following a strategic review of its asset base and organizational structure, Crescent Point identified certain upstream and midstream assets for potential divestitures to refocus its operations and slash debt by more than C$1 billion by the end of 2019. In the next 12 to 24 months, Crescent Point intends to shrink its operating area, reduce debt, and drive free cash flow generation through controlled spending and cost reductions, according to a Sept. 5 news release.
To reduce net debt, Crescent Point said it would maximize free cash flow by implementing a "disciplined" capital allocation process, cutting costs and making asset sales. The company aims to lower the ratio of net debt to funds flow from operations to less than 1.3x, from 2.0x as of June 30, in a commodity price environment of US$65 per barrel at West Texas Intermediate benchmark pricing. When Crescent Point achieves its target debt levels, it would consider returning capital to shareholders through dividends and share repurchases.
Crescent Point had previously restructured its executive team, which cut its annual compensation for executives by 20% compared to the year-ago period. During the restructuring, President and CEO Scott Saxberg, along with the COO and other members of the executive team, retired from their positions.
Crescent Point appointed Craig Bryksa as its new president and CEO. Bryksa previously served as the vice president of engineering west and was in charge of the development of Crescent Point's core assets.
Peter Bannister resigned chairman of the company's board. Robert Heinemann, who previously served as president and CEO of Berry Petroleum Co. LLC, will be the new chairman. Along with Bannister, Gerald Romanzin will retire from the board at the company's 2019 annual general meeting, after which the board would have been completely renewed since inception.
The company expects to lower its CapEx for 2019 to C$1.55 billion to C$1.60 billion, from its 2018 guidance of C$1.78 billion, anticipating a leaner capital allocation plan and prioritizing returns over growth.
The plan's announcement came after the private investment firm Cation Capital Inc., a "long-term" investor in Crescent Point, demanded that the company replace its CEO and chairman to address its share price's "value erosion." Cation said failed leadership is the main reason for Crescent Point's tumbling share price.
Crescent Point shares were down 4%, to $5.69, in early Nasdaq trading Sept. 5. They have traded as high as $9.25 in the past year.
"The company continues to lack a strategy to create value, it continues to lack an experienced, independent CEO and most importantly it continues to be led by a board of directors that has proven itself incapable of — if even concerned about — creating shareholder value," Cation President Sandy Edmonstone said in a Sept. 4 letter.
Cation had been in contact with Bannister and the Crescent Point board since July, according to the letter. Cation in April also filed a proxy circular to nominate four candidates to Crescent Point's board. In its recent letter, Cation said it has identified external candidates for CEO and board roles.