Mr. Craig Bryksa reports

CRESCENT POINT TRANSFORMS PORTFOLIO WITH STRATEGIC ALBERTA MONTNEY CONSOLIDATION

Crescent Point Energy Corp. has entered into an arrangement agreement to acquire Hammerhead Energy Inc., an oil and liquids-rich Alberta Montney producer, for total consideration of approximately $2.55-billion, including approximately $455-million in assumed net debt, consisting of cash and common shares of the company).

"This strategic consolidation is an integral part of our overall portfolio transformation," said Craig Bryksa, president and chief executive officer of Crescent Point. "The acquired assets, which are situated in the volatile oil window in the Alberta Montney and adjacent to our existing lands, provide significant value with premium drilling inventory, infrastructure ownership and scalable market access. This transaction is expected to be immediately accretive to our per-share metrics and to enhance our return of capital profile for shareholders. Upon completion of the transaction, Crescent Point will have a dominant position in both the Alberta Montney and Kaybob Duvernay plays, which are complemented by our low-decline, long-cycle assets in Saskatchewan. Moving forward, our strategic priorities will focus on continued operational execution, balance sheet strength and increasing our return of capital to shareholders."

Key highlights

• Transforms company into a Montney and Kaybob Duvernay focused E&P (exploration and production) with complementary long-cycle assets in Saskatchewan.
• Adds approximately 800 net Montney drilling locations and increases estimated total corporate premium inventory to over 20 years.
• Accretive to 2024 metrics and enhances excess cash flow per share by over 15 per cent, on average, throughout the five-year plan.
• Creates the seventh-largest Canadian E&P by production volume and largest land owner in the Alberta Montney's volatile oil fairway.
• Plan to increase base dividend by 15 per cent to 46 cents per share on an annual basis, subject to closing of the transaction.
• Leverage ratio of 1.1 times net debt to adjusted funds flow expected at year-end 2024 at $80 (U.S.)/bbl (barrel) WTI (West Texas Intermediate).

Strategic rationale

• Establishes dominant position in the Alberta Montney with 350,000 net acres of contiguous land providing synergies: The transaction is accretive to Crescent Point's portfolio and allows the company to consolidate approximately 105,000 net acres of land with Montney rights, directly adjacent to its existing Alberta Montney position at Gold Creek and Karr. The acquired assets are highly attractive with favourable royalty rates on Crown lands and include a high working interest rate of primarily 100 per cent with limited expiry concerns. The acquired lands also have attractive geological characteristics with significant net pay, similar to Crescent Point's Gold Creek assets, and higher than normal pressure. The company expects to be able to drive significant operational synergies across the combined asset base with respect to drilling and completion design, shared infrastructure, well-pad development continuity, and supply chain management efficiencies. A detailed map of the acquired assets in relation to Crescent Point's existing land position is provided later in the original version of this release.
• Increases premium drilling inventory to over 20 years: Adds approximately 800 net Montney drilling locations, further bolstering Crescent Point's short-cycle asset portfolio. This transaction provides decades of inventory with highly attractive returns, capital efficiencies, and finding and development costs, which all rank in the top quartile within the company's portfolio. Crescent Point's inventory of premium drilling locations is estimated to exceed 20 years on a pro forma basis, providing an attractive growth profile.
• Significant infrastructure ownership and market access: Enhances the company's ownership of significant infrastructure within the Alberta Montney, including oil batteries, compressors, water disposal and gathering lines to third party processing plants. Cumulative capital investment made by Hammerhead on major infrastructure since inception is expected to total approximately $500-million by the end of 2023. This infrastructure will support the acquired assets as they grow from approximately 56,000 boe/d (barrels of oil equivalent per day) (50 per cent oil and liquids) expected in 2024 to over an estimated 80,000 boe/d within Crescent Point's five-year business plan. Crescent Point also expects to benefit from long-term contracts already in place to ensure the company has adequate market access for future scalability.
• Expected accretion of over 15 per cent per share to excess cash flow and return of capital: The transaction is expected to be accretive to Crescent Point's 2024 metrics, including adjusted funds flow and excess cash flow per share. Over the company's five-year business plan, the transaction is expected to further strengthen Crescent Point's excess cash flow and return of capital profile by over 15 per cent per share, on average, in addition to its current outlook for mid-single-digit organic growth. Crescent Point expects to generate significant financial and operational synergies in the near-term through lower general and administrative expenses and capital costs. The company will focus on realizing additional value over time, including the efficient development of the acquired assets by optimizing the number of wells drilled per section. The transaction also provides Crescent Point with an estimated $1.3-billion of tax pools.
• Creates seventh-largest E&P in Canada by production volume (weighted 65 per cent to oil and liquids): Pro forma production is expected to total over 200,000 boe/d, with significant drilling inventory in place to deliver additional long-term organic growth. Crescent Point is expected to immediately become the largest owner of land in the Alberta Montney's volatile oil fairway, in addition to already controlling the largest amount of land in the condensate-rich Kaybob Duvernay play. This increased scale is expected to allow the company to continue to improve its cost of capital.

Updated preliminary 2024 guidance

Crescent Point's revised 2024 preliminary guidance, which incorporates the transaction, includes estimated annual production of 200,000 to 208,000 boe/d (65-per-cent oil and liquids) based on development capital expenditures of $1.45-billion to $1.55-billion. This budget is expected to generate over $1.2-billion of excess cash flow at $80 (U.S.)/bbl WTI.

Approximately 80 per cent of Crescent Point's 2024 budget is expected to be allocated to its Alberta Montney and Kaybob Duvernay plays, with the remaining capital allocated to the company's low-decline, long-cycle assets in Saskatchewan.

The revised capital expenditures budget incorporates approximately $400-million of development capital associated with the newly acquired assets, which are forecast to grow from approximately 56,000 boe/d in 2024 to approximately 80,000 boe/d within the company's five-year business plan. In addition to this long-term growth, capital expenditures for the acquired assets are expected to moderate subsequent to 2024, resulting in significant excess cash flow generation.

The company plans to release its formal 2024 guidance upon closing of the transaction, which is expected in December, 2023.

Focus on operational execution, balance sheet and increasing return of capital

Crescent Point's strategic priorities will continue to focus on operational execution, balance sheet strength and increasing return of capital to shareholders.

This transaction builds on the operational momentum achieved by the company since its initial entry into the Kaybob Duvernay and Alberta Montney. Crescent Point's execution to date in these plays has resulted in enhanced returns for shareholders through a combination of realized efficiencies and enhanced productivity through drilling and completion optimization. The company plans to build on this success with the announced transaction.

Given the expected accretion from this transaction, the company plans to increase its quarterly base dividend by 15 per cent to 11.5 cents per share, or to 46 cents per share annually, up from 40 cents per share currently. This base dividend increase is subject to approval from Crescent Point's board of directors, the successful closing of the transaction and market conditions. It is expected to be effective in connection with the first quarter 2024 dividend, which is anticipated to be declared in early 2024.

Crescent Point's net debt is expected to total approximately $3.7-billion following the transaction, or 1.4 times adjusted funds flow. This leverage ratio is expected to improve to approximately 1.1 times by year-end 2024, at $80 (U.S.)/bbl WTI. As part of its commitment to balance sheet strength, the company has established a near-term net debt target of $2.2-billion, or approximately 1.0 times adjusted funds flow at mid-cycle pricing.

The company plans to continue to allocate approximately 60 per cent of its excess cash flow to dividends and share repurchases in the interim and plans to increase this allocation over time as it further strengthens its balance sheet.

Over the long term, Crescent Point continues to target a leverage ratio of less than 1.0 times in a low commodity price environment. To protect against commodity price volatility, the company will continue to hedge a portion of its production, including approximately a third of its anticipated production in 2024, net of royalty interest.

Transaction metrics

Based on estimated production for the acquired assets of approximately 56,000 boe/d in 2024, the transaction metrics are as follows, assuming $80 (U.S.)/bbl WTI, $3.50/mcf AECO, and 73 cents U.S. dollar/Canadian dollar exchange rate:

• 3.4 times annual net operating income;
• $45,500 per flowing boe;
• $8.25 per boe of proved plus probable (2P) reserves of 308.7 MMboe, as estimated by the independent evaluator McDaniel & Associates Consultants Ltd., as at Nov. 1, 2023. Including approximately $2.7-billion of undiscounted future development capital, the transaction equates to $16.93 per boe of 2P reserves, resulting in a recycle ratio of approximately 2.2 times.

The net present value (NPV) of the proved (1P) and 2P reserves of the acquired assets total approximately $2.1-billion and $3.4-billion respectively, based on independent engineering evaluation and pricing as of fourth quarter 2023. The reserves attributed to the acquired assets are based on 252 net booked locations, or approximately a third of the total 800 internally identified net premium drilling locations.

Transaction financing and financial advisers

Total consideration for the transaction is approximately $2.55-billion, including approximately $455-million of Hammerhead's net debt. Hammerhead shareholders will receive $21.00 per fully diluted common share of Hammerhead, through a combination of approximately $1.5-billion in cash and 53.2 million common shares of Crescent Point (approximately $548-million).

The company plans to finance the cash portion of the transaction through its existing credit facilities, a new three-year term loan totalling $750-million and approximately $500-million of gross cash proceeds from an equity offering, as announced separately. The closing of the transaction is not conditional upon closing of the term loan financing or the equity offering.

The boards of directors of both Crescent Point and Hammerhead have unanimously approved the transaction, which is subject to court, Toronto Stock Exchange and other stock exchange and regulatory approvals and other customary closing conditions.

The agreement provides for mutual non-completion fees of $85-million in the event the transaction is not completed or is terminated by either party in certain circumstances.

Hammerhead shareholders, including certain directors and all of the officers, holding an aggregate of approximately 82 per cent of Hammerhead shares outstanding, have entered into voting support agreements with Crescent Point to vote in favour of the transaction and against any alternative or competing transaction.

Certain affiliates of Riverstone Holdings LLC, Hammerhead's largest shareholder, will own approximately seven per cent of Crescent Point's pro forma issued and outstanding common shares upon closing of the transaction. Riverstone has agreed to enter into a lock-up agreement upon the closing of the transaction whereby it will hold 50 per cent of the Crescent Point shares it receives pursuant to the transaction for a period of at least three months following the closing thereof and hold the remaining 50 per cent of the Crescent Point shares that it receives pursuant to the transaction for a period of at least six months following the closing, subject to the provisions of such lock-up agreement.

BMO Capital Markets and RBC Capital Markets are acting as financial advisers to Crescent Point on the transaction and have each provided a verbal opinion to Crescent Point's board of directors to the effect that, as of the date of each such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be paid by Crescent Point under the agreement is fair from a financial point of view to Crescent Point. Scotiabank is acting as strategic adviser to Crescent Point.

The Bank of Nova Scotia, BMO Capital Markets and Royal Bank of Canada are acting as co-lead arrangers and joint bookrunners on the company's new term loan facility.

Norton Rose Fulbright Canada LLP is acting as legal adviser to Crescent Point on the transaction.

Conference call details

Crescent Point management will host a pre-recorded conference call today, Monday, Nov. 6, 2023, starting at 2:30 p.m. MT (4:30 p.m. ET) to discuss the announced Alberta Montney consolidation. A slide deck will accompany the conference call and can be found on Crescent Point's website.

Participants can listen to this event online via webcast. The conference call can be accessed without operator assistance by registering on-line to receive an instant automated callback. Alternatively, the conference call can be accessed with operator assistance by dialling 1-888-390-0605. The webcast will be archived for replay and can be accessed on Crescent Point's conference call and webcast webpage. The replay will be available approximately one hour following completion of the call.

Shareholders and investors can also find a presentation on Crescent Point's website, further highlighting details of the transaction.

Alberta Montney land position

The attached graphic shows the acquired assets in relation to Crescent Point's existing land position in the Alberta Montney.

We seek Safe Harbor.