EX-99.1 2 exh99_1.htm EXHIBIT 99.1 exh99_1.htm
Exhibit 99.1
CONSOLIDATED BALANCE SHEETS
 
               
 
 
As at
 
 
June 30,

 
December 31,

 
(UNAUDITED) (Cdn$000s)
Notes
2014

 
2013

 
ASSETS
 
 
 
 
 
Cash
 
30,030

 
15,941

 
Accounts receivable
 
445,894

 
352,519

 
Prepaids and deposits
 
9,665

 
5,532

 
Derivative asset
21
4,461

 
3,126

 
Total current assets
 
490,050

 
377,118

 
Long-term investments
4
83,124

 
74,229

 
Derivative asset
21
46,105

 
48,098

 
Other long-term assets
5
53,459

 
37,958

 
Exploration and evaluation
6, 7
682,417

 
688,324

 
Property, plant and equipment
7, 8
13,294,923

 
11,259,147

 
Goodwill
9
251,919

 
251,919

 
Total assets
 
14,901,997

 
12,736,793

 
LIABILITIES
 
 
 
 
 
Accounts payable and accrued liabilities
 
721,396

 
789,305

 
Dividends payable
13
96,781

 
90,849

 
Current portion of long-term debt
10
90,035

 
-

 
Derivative liability
21
211,719

 
99,388

 
Decommissioning liability
12
47,876

 
18,469

 
Total current liabilities
 
1,167,807

 
998,011

 
Long-term debt
10
2,592,026

 
1,734,114

 
Derivative liability
21
137,083

 
25,846

 
Other long-term liabilities
11, 19
28,667

 
3,072

 
Decommissioning liability
12
718,805

 
611,069

 
Deferred income tax
 
1,053,330

 
864,608

 
Total liabilities
 
5,697,718

 
4,236,720

 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
Shareholders’ capital
13
13,105,883

 
11,990,305

 
Contributed surplus
 
132,058

 
109,564

 
Deficit
14
(4,127,310
)
 
(3,692,437
)
 
Accumulated other comprehensive income
 
93,648

 
92,641

 
Total shareholders' equity
 
9,204,279

 
8,500,073

 
Total liabilities and shareholders' equity
 
14,901,997

 
12,736,793

 
See accompanying notes to the consolidated financial statements.




 
   
CRESCENT POINT ENERGY CORP.
1

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
                           
 
 
Three months ended June 30
 
 
Six months ended June 30
 
 
(UNAUDITED) (Cdn$000s, except per share amounts)
Notes
2014

 
2013

 
2014

 
2013

 
REVENUE AND OTHER INCOME
 
 
 
 
 
 
 
 
 
Oil and gas sales
 
1,147,880

 
845,270

 
2,176,809

 
1,636,982

 
Royalties
 
(202,371
)
 
(140,925
)
 
(383,077
)
 
(289,912
)
 
Oil and gas revenue
 
945,509

 
704,345

 
1,793,732

 
1,347,070

 
Derivative gains (losses)
16, 21
(154,152
)
 
35,182

 
(346,815
)
 
(47,432
)
 
Other income (loss)
17
5,277

 
(13,338
)
 
8,895

 
(9,678
)
 
 
 
796,634

 
726,189

 
1,455,812

 
1,289,960

 
EXPENSES
 
 
 
 
 
 
 
 
 
Operating
 
157,832

 
129,014

 
305,391

 
256,845

 
Transportation
 
30,769

 
24,303

 
55,989

 
45,761

 
General and administrative
 
29,941

 
19,231

 
47,320

 
36,601

 
Interest on long-term debt
 
25,852

 
19,803

 
47,457

 
38,576

 
Foreign exchange (gain) loss
18
(37,399
)
 
35,664

 
3,716

 
50,225

 
Share-based compensation
19
33,406

 
8,107

 
53,601

 
25,420

 
Depletion, depreciation and amortization
6, 8
409,642

 
365,015

 
783,940

 
720,445

 
Accretion on decommissioning liability
12
4,750

 
3,321

 
9,480

 
6,465

 
 
 
654,793

 
604,458

 
1,306,894

 
1,180,338

 
Net income before tax
 
141,841

 
121,731

 
148,918

 
109,622

 
 
 
 
 
 
 
 
 
 
 
Tax expense (recovery)
 
 
 
 
 
 
 
 
 
Current
 
5

 
(5
)
 
5

 
(5
)
 
Deferred
 
43,250

 
49,404

 
19,437

 
38,907

 
Net income
 
98,586

 
72,332

 
129,476

 
70,720

 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss
 
 
 
 
 
 
 
 
Foreign currency translation of foreign operations
 
(59,370
)
 
49,431

 
1,007

 
75,960

 
Comprehensive income
 
39,216

 
121,763

 
130,483

 
146,680

 
 
 
 
 
 
 
 
 
 
 
Net income per share
20
 
 
 
 
 
 
 
 
Basic
 
0.24

 
0.19

 
0.32

 
0.19

 
Diluted
 
0.24

 
0.19

 
0.32

 
0.18

 
See accompanying notes to the consolidated financial statements.

 
   
CRESCENT POINT ENERGY CORP.
2

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 
                                 
(UNAUDITED) (Cdn$000s, except per share amounts)
Notes
Shareholders’ capital

 
Contributed surplus

 
Deficit

 
Accumulated other comprehensive income (loss)

 
Total
shareholders’
equity

 
December 31, 2013
 
11,990,305

 
109,564

 
(3,692,437
)
 
92,641

 
8,500,073

 
Issued on capital acquisitions
13
908,905

 
 
 
 
 
 
 
908,905

 
Issued pursuant to the DRIP (1) and SDP (2)
13
162,582

 


 


 


 
162,582

 
Redemption of restricted shares
13
44,475

 
(45,228
)
 
55

 


 
(698
)
 
Share issue costs, net of tax
 
(384
)
 


 


 


 
(384
)
 
Share-based compensation
19


 
68,552

 


 


 
68,552

 
Forfeit of restricted shares
19


 
(830
)
 


 


 
(830
)
 
Net income
 


 


 
129,476

 


 
129,476

 
Dividends ($1.38 per share)
 


 


 
(564,404
)
 


 
(564,404
)
 
Foreign currency translation adjustment
 


 


 


 
1,007

 
1,007

 
June 30, 2014
 
13,105,883

 
132,058

 
(4,127,310
)
 
93,648

 
9,204,279

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
11,249,168

 
102,755

 
(2,755,832
)
 
(1,279
)
 
8,594,812

 
Issued pursuant to the DRIP (1)
 
360,456

 


 


 


 
360,456

 
Redemption of restricted shares
 
55,054

 
(55,322
)
 
6

 


 
(262
)
 
Share issue costs, net of tax
 
(393
)
 


 


 


 
(393
)
 
Share-based compensation
 


 
33,328

 


 


 
33,328

 
Forfeit of restricted shares
 


 
(71
)
 


 


 
(71
)
 
Net income
 


 


 
70,720

 


 
70,720

 
Dividends ($1.38 per share)
 


 


 
(534,899
)
 


 
(534,899
)
 
Foreign currency translation adjustment
 


 


 


 
75,960

 
75,960

 
June 30, 2013
 
11,664,285

 
80,690

 
(3,220,005
)
 
74,681

 
8,599,651

 
   
(1)
Premium Dividend TM and Dividend Reinvestment Plan.
   
(2)
Share Dividend Plan.
See accompanying notes to the consolidated financial statements.

 
   
CRESCENT POINT ENERGY CORP.
3

CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                           
 
 
Three months ended June 30
 
 
Six months ended June 30
 
 
(UNAUDITED) (Cdn$000s)
Notes
2014

 
2013

 
2014

 
2013

 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
Net income
 
98,586

 
72,332

 
129,476

 
70,720

 
Items not affecting cash
 
 
 
 
 
 
 
 
 
Other (income) loss
17
(5,277
)
 
13,338

 
(8,895
)
 
9,678

 
Deferred tax expense
 
43,250

 
49,404

 
19,437

 
38,907

 
Share-based compensation
19
33,406

 
8,107

 
53,601

 
25,420

 
Depletion, depreciation and amortization
 
409,642

 
365,015

 
783,940

 
720,445

 
Accretion on decommissioning liability
 
4,750

 
3,321

 
9,480

 
6,465

 
Unrealized (gains) losses on derivatives
16, 21
81,597

 
(43,699
)
 
217,781

 
34,476

 
Unrealized (gain) loss on foreign exchange
18
(38,947
)
 
34,667

 
1,994

 
48,903

 
Decommissioning expenditures
 
(4,149
)
 
(1,281
)
 
(17,310
)
 
(5,025
)
 
Change in non-cash working capital
23
23,627

 
(38,010
)
 
31,117

 
(27,556
)
 
 
 
646,485

 
463,194

 
1,220,621

 
922,433

 
INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
Development capital and other expenditures
 
(293,210
)
 
(262,714
)
 
(873,772
)
 
(800,226
)
 
Capital acquisitions, net
7
(306,975
)
 
(2,553
)
 
(337,578
)
 
(26,662
)
 
Other long-term assets
 
(15,968
)
 
(4,890
)
 
(15,501
)
 
(8,030
)
 
Change in non-cash working capital
23
(153,750
)
 
(61,417
)
 
(168,095
)
 
(41,082
)
 
 
 
(769,903
)
 
(331,574
)
 
(1,394,946
)
 
(876,000
)
 
FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
Issue of shares, net of issue costs
 
(647
)
 
(45
)
 
(1,272
)
 
(799
)
 
Increase (decrease) in long-term debt
 
338,308

 
(47,244
)
 
585,327

 
125,421

 
Cash dividends
 
(203,814
)
 
(86,098
)
 
(401,822
)
 
(174,442
)
 
Change in non-cash working capital
23
5,219

 
1,229

 
5,932

 
2,620

 
 
 
139,066

 
(132,158
)
 
188,165

 
(47,200
)
 
Impact of foreign currency on cash balances
 
(285
)
 
538

 
249

 
767

 
INCREASE IN CASH
 
15,363

 
-

 
14,089

 
-

 
CASH AT BEGINNING OF PERIOD
 
14,667

 
-

 
15,941

 
-

 
CASH AT END OF PERIOD
 
30,030

 
-

 
30,030

 
-

 
See accompanying notes to the consolidated financial statements.

Supplementary Information:
 
                         
Cash taxes (paid) recovered
1,713

 
5

 
1,390

 
(21
)
 
Cash interest paid
(29,144
)
 
(18,633
)
 
(46,356
)
 
(36,948
)
 


 
   
CRESCENT POINT ENERGY CORP.
4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
June 30, 2014 (UNAUDITED)
   
1.
STRUCTURE OF THE BUSINESS
The principal undertakings of Crescent Point Energy Corp. (the “Company” or “Crescent Point”) are to carry on the business of acquiring, developing and holding interests in petroleum and natural gas properties and assets related thereto through a general partnership and wholly owned subsidiaries.
Crescent Point is the ultimate parent company and is amalgamated in Alberta, Canada under the Alberta Business Corporations Act. The address of the principal place of business is 2800, 111 - 5th Ave S.W., Calgary, Alberta, Canada, T2P 3Y6.
These interim consolidated financial statements were approved and authorized for issue by the Company's Board of Directors on August 12, 2014.
   
2.
BASIS OF PREPARATION
These interim consolidated financial statements of the Company are prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). These interim consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim consolidated financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting, and have been prepared following the same accounting policies as the annual consolidated financial statements for the year ended December 31, 2013 except as described in Note 3. The disclosures provided below are incremental to those included with the annual consolidated financial statements. Certain information and disclosures included in the notes to the annual consolidated financial statements are condensed herein or are disclosed on an annual basis only. Accordingly, these interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2013.
The policies applied in these interim consolidated financial statements are based on IFRS issued and outstanding as of August 12, 2014, the date the Board of Directors approved the statements.
The Company’s presentation currency is Canadian dollars and all amounts reported are Canadian dollars unless noted otherwise. References to “US$” are to United States dollars. Crescent Point's operations are aggregated into one reportable segment based on the similarities between the Company's Canadian and U.S. operations.
   
3.
CHANGES IN ACCOUNTING POLICIES
Effective January 1, 2014, the Company adopted the following IFRS:
   
•
IAS 36 Impairment of Assets - IAS 36 was amended in May 2013 to reduce the circumstances in which the recoverable amount of CGUs is required to be disclosed and clarify the disclosures required when an impairment loss has been recognized or reversed in the period. The amendments require retrospective application and were adopted by the Company on January 1, 2014. The adoption will only impact Crescent Point's disclosures in the notes to the financial statements in periods when an impairment loss or impairment recovery is recognized. The application of the amendment had no impact on the consolidated statements of comprehensive income or the consolidated balance sheets.
   
•
IFRIC 21 Levies - IFRIC 21 provides clarification on accounting for levies in accordance with the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation and confirms that a liability for a levy is recognized only when the triggering event specified in the legislation occurs.  The retrospective adoption of this interpretation does not have any impact on Crescent Point’s consolidated financial statements.
Effective January 1, 2017, the Company will adopt the following IFRS:
   
•
IFRS 15 Revenue from Contracts with Customers - IFRS 15 was issued in May 2014 and replaces IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations. The standard is required to be adopted either retrospectively or using a modified transaction approach for fiscal years beginning on or after January 1, 2017 with earlier adoption permitted. IFRS 15 will be adopted by Crescent Point on January 1, 2017 and the Company is currently evaluating the impact of the standard on Crescent Point’s consolidated financial statements.

 
   
CRESCENT POINT ENERGY CORP.
5

   
4.
LONG-TERM INVESTMENTS
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Investments in public companies, beginning of period
24,259

 
28,314

 
Unrealized gain (loss) recognized in other income (loss)
10,690

 
(4,055
)
 
Investments in public companies, end of period
34,949

 
24,259

 
 
 
 
 
 
Investments in private companies, beginning of period
49,970

 
56,592

 
Unrealized loss recognized in other income (loss)
(1,795
)
 
(6,622
)
 
Investments in private companies, end of period
48,175

 
49,970

 
 
 
 
 
 
Long-term investments, end of period
83,124

 
74,229

 
   
a)
Public Companies
The Company holds common shares in publicly traded oil and gas companies. The investments are classified as financial assets at fair value through profit or loss and are fair valued with the resulting gain or loss recorded in net income. At June 30, 2014, the investments are recorded at a fair value of $34.9 million which is $69.0 million less than the original cost of the investments. At December 31, 2013, the investments were recorded at a fair value of $24.3 million which is $79.7 million less than the original cost of the investments.
   
b)
Private Companies
The Company holds common shares in private oil and gas companies. The investments are classified as financial assets at fair value through profit or loss and are fair valued with the resulting gain or loss recorded in net income. At June 30, 2014, the investments are recorded at a fair value of $48.2 million which is $18.8 million less than the original cost of the investments. At December 31, 2013, the investments were recorded at a fair value of $50.0 million which is $17.0 million less than the original cost of the investments. See Note 21 - "Financial Instruments and Derivatives" for additional information regarding the Company's Level 3 investments.
   
5.
OTHER LONG-TERM ASSETS
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Reclamation fund
41,682

 
26,181

 
Other receivables
11,777

 
11,777

 
Other long-term assets
53,459

 
37,958

 
   
a)
Reclamation fund
The following table reconciles the reclamation fund:
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Balance, beginning of period
26,181

 
10,455

 
Contributions
33,177

 
30,734

 
Expenditures
(17,676
)
 
(15,008
)
 
Balance, end of period
41,682

 
26,181

 
   
b)
Other receivables
At June 30, 2014, the Company had investment tax credits of $11.8 million (December 31, 2013 - $11.8 million).

 
   
CRESCENT POINT ENERGY CORP.
6

   
6.
EXPLORATION AND EVALUATION ASSETS
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Exploration and evaluation assets at cost
1,719,763

 
1,590,298

 
Accumulated amortization
(1,037,346
)
 
(901,974
)
 
Net carrying amount
682,417

 
688,324

 
 
 
 
 
 
Reconciliation of movements during the period
 
 
 
 
Cost, beginning of period
1,590,298

 
1,700,442

 
Accumulated amortization, beginning of period
(901,974
)
 
(619,685
)
 
Net carrying amount, beginning of period
688,324

 
1,080,757

 
 
 
 
 
 
Net carrying amount, beginning of period
688,324

 
1,080,757

 
Acquisitions through business combinations, net
55,970

 
6,600

 
Additions
220,772

 
471,900

 
Dispositions
-

 
(1,993
)
 
Transfers to property, plant and equipment
(147,198
)
 
(614,446
)
 
Amortization
(135,631
)
 
(275,504
)
 
Foreign exchange
180

 
21,010

 
Net carrying amount, end of period
682,417

 
688,324

 
Exploration and evaluation ("E&E") assets consist of the Company's undeveloped land and exploration projects which are pending the determination of technical feasibility. Additions represent the Company's share of the cost of E&E assets. At June 30, 2014, $682.4 million remains in E&E assets after $147.2 million was transferred to property, plant and equipment ("PP&E") following the determination of technical feasibility during the six months ended June 30, 2014 (year ended December 31, 2013 - $688.3 million and $614.4 million, respectively).
Impairment test of exploration and evaluation assets
There were no indicators of impairment at June 30, 2014 or December 31, 2013.

 
   
CRESCENT POINT ENERGY CORP.
7

   
7.
CAPITAL ACQUISITIONS AND DISPOSITIONS
If the material business combinations outlined below under Corporate Acquisitions and under Major Property Acquisitions had closed on January 1, 2014, Crescent Point's oil and gas sales and oil and gas sales less royalties, transportation and operating expenses for the six months ended June 30, 2014 would have been approximately $2.3 billion and $1.5 billion, respectively. This pro-forma information is not necessarily indicative of the results should the material business combinations have actually occurred on January 1, 2014.
Oil and gas sales and oil and gas sales less royalties, transportation and operating expenses for the six months ended June 30, 2014 includes approximately $43.1 million and $26.9 million, respectively, attributable to these same material business combinations.
In the six months ended June 30, 2014, the Company incurred $10.0 million (June 30, 2013 - $5.3 million) of transaction costs related to business combinations that are recorded as general and administrative expenses.
a) Corporate Acquisitions
CanEra Energy Corp.
On May 15, 2014, Crescent Point completed the acquisition, by way of plan of arrangement, of all issued and outstanding common shares of CanEra Energy Corp. ("CanEra"), a private oil and gas company with properties in southeast Saskatchewan. Total consideration of approximately $1.1 billion included the issuance of approximately 12.9 million common shares, cash consideration of $191.8 million, assumed long-term debt and working capital ($1.3 billion was allocated to PP&E and $21.1 million was allocated to E&E assets).
 
           
($000s)
 
 
 
 
Fair value of net assets acquired
 
 
 
 
Accounts receivable
 
 
45,115

 
Property, plant and equipment
 
 
1,327,982

 
Exploration and evaluation
 
 
21,078

 
Accounts payable and accrued liabilities
 
 
(37,949
)
 
Derivative liability
 
 
(6,445
)
 
Long-term debt
 
 
(360,456
)
 
Decommissioning liability
 
 
(65,607
)
 
Deferred income tax liability
 
 
(169,450
)
 
Total net assets acquired
 
 
754,268

 
Consideration
 
 
 
 
Shares issued (12,928,091 shares)
 
 
562,501

 
Cash
 
 
191,767

 
Total purchase price

 
754,268

 
b) Major Property Acquisitions
Saskatchewan Viking Asset Acquisition
On June 12, 2014, Crescent Point completed the acquisition of Saskatchewan Viking oil assets for total consideration of $331.7 million comprised of the issuance of approximately 7.6 million common shares less net cash received on customary closing adjustments of $12.0 million ($338.8 million was allocated to PP&E). These assets were acquired with full tax pools and no working capital items.
c) Minor Property Acquisitions and Dispositions
Crescent Point completed minor property acquisitions and dispositions during the six months ended June 30, 2014 for net consideration of $160.5 million ($126.9 million was allocated to PP&E and $34.9 million was allocated to E&E assets). These minor property acquisitions and dispositions were completed with full tax pools and no working capital items.

 
   
CRESCENT POINT ENERGY CORP.
8

   
8.
PROPERTY, PLANT AND EQUIPMENT
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Development and production assets
17,620,718

 
14,964,220

 
Corporate assets
52,547

 
26,176

 
Property, plant and equipment at cost
17,673,265

 
14,990,396

 
Accumulated depletion, depreciation and impairment
(4,378,342
)
 
(3,731,249
)
 
Net carrying amount
13,294,923

 
11,259,147

 
 
 
 
 
 
Reconciliation of movements during the period
 
 
 
 
 
 
 
 
 
Development and production assets
 
 
 
 
Cost, beginning of period
14,964,220

 
12,740,337

 
Accumulated depletion and impairment, beginning of period
(3,715,311
)
 
(2,431,102
)
 
Net carrying amount, beginning of period
11,248,909

 
10,309,235

 
 
 
 
 
 
Net carrying amount, beginning of period
11,248,909

 
10,309,235

 
Acquisitions through business combinations, net
1,793,893

 
119,611

 
Additions
717,779

 
1,414,067

 
Dispositions
(130
)
 
(2,454
)
 
Transfers from exploration and evaluation assets
147,198

 
614,446

 
Depletion
(646,283
)
 
(1,181,383
)
 
Impairment
-

 
(98,291
)
 
Foreign exchange
(1,027
)
 
73,678

 
Net carrying amount, end of period
13,260,339

 
11,248,909

 
 
 
 
 
 
Cost, end of period
17,620,718

 
14,964,220

 
Accumulated depletion and impairment, end of period
(4,360,379
)
 
(3,715,311
)
 
Net carrying amount, end of period
13,260,339

 
11,248,909

 
 
 
 
 
 
Corporate assets
 
 
 
 
Cost, beginning of period
26,176

 
22,843

 
Accumulated depreciation, beginning of period
(15,938
)
 
(12,210
)
 
Net carrying amount, beginning of period
10,238

 
10,633

 
 
 
 
 
 
Net carrying amount, beginning of period
10,238

 
10,633

 
Additions
26,368

 
3,285

 
Depreciation
(2,026
)
 
(3,721
)
 
Foreign exchange
4

 
41

 
Net carrying amount, end of period
34,584

 
10,238

 
 
 
 
 
 
Cost, end of period
52,547

 
26,176

 
Accumulated depreciation, end of period
(17,963
)
 
(15,938
)
 
Net carrying amount, end of period
34,584

 
10,238

 
At June 30, 2014, future development costs of $6.7 billion (December 31, 2013 - $5.9 billion) are included in costs subject to depletion.
Direct general and administrative costs capitalized by the Company during the six months ended June 30, 2014 were $25.7 million (year ended December 31, 2013 - $42.2 million), including $14.3 million of share-based compensation costs (year ended December 31, 2013 - $23.1 million).


 
   
CRESCENT POINT ENERGY CORP.
9

Impairment test of property, plant and equipment
There were no indicators of impairment at June 30, 2014.
   
9.
GOODWILL
At June 30, 2014, the Company had goodwill of $251.9 million (December 31, 2013 - $251.9 million). Goodwill has been assigned to the Canadian operating segment.
   
10.
LONG-TERM DEBT
The following table reconciles long-term debt:
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Bank credit facilities
1,119,654

 
546,595

 
Senior guaranteed notes
1,562,407

 
1,187,519

 
Long-term debt
2,682,061

 
1,734,114

 
Long-term debt due within one year
90,035

 
-

 
Long-term debt due beyond one year
2,592,026

 
1,734,114

 
   
a)
Bank Credit Facilities
At June 30, 2014, the Company had a syndicated unsecured credit facility with fourteen banks and an operating credit facility with one Canadian chartered bank, for a total amount available under the combined facilities of $2.1 billion. The syndicated unsecured credit facility also included an accordion feature that allowed the Company to increase the facility by up to $500.0 million.
The Company was in compliance with all debt covenants at June 30, 2014.
The Company had letters of credit in the amount of $3.9 million outstanding at June 30, 2014.
On August 12, 2014, the syndicated unsecured credit facility and the operating credit facility were renewed and increased to a total amount available under the combined facilities of $2.6 billion and the syndicated unsecured credit facility was expanded to now include a total of sixteen banks. The syndicated unsecured credit facility continues to include an accordion feature that allows the Company to increase the facility by up to $500.0 million. The credit facilities bear interest at the Canadian prime rate plus a margin based on a sliding scale ratio of the Company's senior debt to EBITDA, adjusted for certain non-cash items. The syndicated unsecured credit facility constitutes a revolving credit facility for a three year term which is extendible annually; the current maturity date is June 10, 2017. The operating credit facility constitutes a revolving facility for a three year term which is extendible annually; the current maturity date is June 10, 2017. The combined credit facilities have covenants which restrict the Company's ratio of senior debt to EBITDA, adjusted for certain non-cash items, to a maximum of 3.5:1.0 and the ratio of debt to capital, adjusted for certain non-cash items, to a maximum of 0.55:1.0.
The Company manages its credit facilities through a combination of bankers' acceptance loans and interest rate swaps.

 
   
CRESCENT POINT ENERGY CORP.
10

   
b)
Senior Guaranteed Notes
The Company has closed private offerings of senior guaranteed notes raising total gross proceeds of US$1.29 billion and Cdn$182.0 million. The notes are unsecured and rank pari passu with the Company's bank credit facilities and carry a bullet repayment on maturity. The senior guaranteed notes have financial covenants similar to those of the combined credit facilities described above. The terms, rates and carrying amounts of the Company's outstanding senior guaranteed notes are detailed below:
 
                     
Principal ($000s)
Maturity Date
Coupon Rate

Interest Payment Dates
June 30, 2014

 
December 31, 2013

 
Cdn$50,000
March 24, 2015
4.92
%
September 24 and March 24
50,000

 
50,000

 
US$37,500
March 24, 2015
4.71
%
September 24 and March 24
40,035

 
39,885

 
US$52,000
April 14, 2016
3.93
%
October 14 and April 14
55,515

 
55,307

 
US$67,500
March 24, 2017
5.48
%
September 24 and March 24
72,063

 
71,793

 
US$31,000
April 14, 2018
4.58
%
October 14 and April 14
33,096

 
32,972

 
US$20,000
June 12, 2018
2.65
%
December 12 and June 12
21,352

 
21,272

 
Cdn$7,000
May 22, 2019
4.29
%
November 22 and May 22
7,000

 
7,000

 
US$68,000
May 22, 2019
3.39
%
November 22 and May 22
72,597

 
72,325

 
US$155,000
March 24, 2020
6.03
%
September 24 and March 24
165,478

 
164,858

 
Cdn$50,000
April 14, 2021
5.53
%
October 14 and April 14
50,000

 
50,000

 
US$82,000
April 14, 2021
5.13
%
October 14 and April 14
87,543

 
87,215

 
US$52,500
June 20, 2021
3.29
%
December 20 and June 20
56,049

 
-

 
Cdn$25,000
May 22, 2022
4.76
%
November 22 and May 22
25,000

 
25,000

 
US$200,000
May 22, 2022
4.00
%
November 22 and May 22
213,520

 
212,720

 
Cdn$10,000
June 12, 2023
4.11
%
December 12 and June 12
10,000

 
10,000

 
US$270,000
June 12, 2023
3.78
%
December 12 and June 12
288,252

 
287,172

 
Cdn$40,000
June 20, 2024
3.85
%
December 20 and June 20
40,000

 
-

 
US$257,500
June 20, 2024
3.75
%
December 20 and June 20
274,907

 
-

 
Senior guaranteed notes
 
 
1,562,407

 
1,187,519

 
Senior guaranteed notes due within one year
 
90,035

 
-

 
Senior guaranteed notes due beyond one year
 
1,472,372

 
1,187,519

 
Concurrent with the issuance of US$1.26 billion senior guaranteed notes, the Company entered into cross currency interest rate swaps (''CCIRS'') with a syndicate of financial institutions. To manage the Company's foreign exchange risk, the CCIRS fix the US dollar amount of the notes for purposes of interest and principal repayments at a notional amount of $1.29 billion. Concurrent with the issuance of US$30.0 million senior guaranteed notes, the Company entered a cross currency principal swap which fixed the principal repayment at a notional amount of $32.2 million. See additional information in Note 21 - “Financial Instruments and Derivatives”.
   
11.
OTHER LONG-TERM LIABILITIES
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Lease inducement (1)
25,394

 
-

 
Long-term compensation liability (2)
3,273

 
3,072

 
Other long-term liabilities
28,667

 
3,072

 
   
(1)
The Company's lease inducement is associated with the building lease for Crescent Point's future corporate office. This non-cash liability will be amortized on a straight-line basis over the term of the lease commencing in June 2015 and extending to June 2030.
   
(2)
Long-term compensation liability relates to the Deferred Share Unit ("DSU") Plan. See additional information in Note 19 - "Share-based Compensation".
   
12.
DECOMMISSIONING LIABILITY
Upon retirement of its oil and gas assets, the Company anticipates substantial costs associated with decommissioning. The estimated cash flows have been discounted using an average risk-free rate of approximately 3 percent and an inflation rate of 2 percent (December 31, 2013 - approximately 3 percent and 2 percent, respectively).

 
   
CRESCENT POINT ENERGY CORP.
11

The following table reconciles the decommissioning liability:
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Decommissioning liability, beginning of period
629,538

 
502,432

 
Liabilities incurred
15,719

 
32,562

 
Liabilities acquired through capital acquisitions
74,189

 
4,291

 
Liabilities disposed through capital dispositions
(125
)
 
(793
)
 
Liabilities settled
(17,310
)
 
(11,375
)
 
Revaluation of acquired decommissioning liabilities (1)
55,190

 
3,256

 
Change in estimated future costs
-

 
115,266

 
Change in discount rate
-

 
(30,263
)
 
Accretion expense
9,480

 
14,162

 
Decommissioning liability, end of period
766,681

 
629,538

 
Expected to be incurred within one year
47,876

 
18,469

 
Expected to be incurred beyond one year
718,805

 
611,069

 
   
(1)
These amounts relate to the revaluation of acquired decommissioning liabilities at the end of the period using a risk-free discount rate. At the date of acquisition, acquired decommissioning liabilities are fair valued.
   
13.
SHAREHOLDERS’ CAPITAL
Crescent Point has an unlimited number of common shares authorized for issuance.
 
                         
 
June 30, 2014
 
 
December 31, 2013
 
 


Number of
shares

 
Amount
($000s)

 
Number of
shares

 
Amount
($000s)

 
Common shares, beginning of period
394,993,566

 
12,181,396

 
374,702,264

 
11,439,861

 
Issued on capital acquisitions
20,572,418

 
908,905

 
-

 
-

 
Issued on redemption of restricted shares (1)
1,058,800

 
44,475

 
2,045,169

 
82,395

 
Issued pursuant to DRIP (2) and SDP (3)
4,161,319

 
162,582

 
18,246,133

 
659,140

 
Common shares, end of period
420,786,103

 
13,297,358

 
394,993,566

 
12,181,396

 
Cumulative share issue costs, net of tax
-

 
(191,475
)
 
-

 
(191,091
)
 
Total shareholders’ capital, end of period
420,786,103

 
13,105,883

 
394,993,566

 
11,990,305

 
   
(1)
The amount of shares issued on redemption of restricted shares is net of any employee withholding taxes.
   
(2)
Premium Dividend TM and Dividend Reinvestment Plan.
   
(3)
Share Dividend Plan.
At June 30, 2014, the Company recorded dividends payable of $96.8 million which was settled with cash of $67.3 million and Crescent Point common shares issued pursuant to the DRIP and SDP valued at $29.5 million (683,544 common shares) on July 15, 2014.  At December 31, 2013, the Company recorded dividends payable of $90.8 million which was settled with cash of $65.0 million and Crescent Point common shares issued pursuant to the DRIP valued at $25.8 million (678,361 common shares) on January 15, 2014. 
During the second quarter of 2014, the Company implemented a Share Dividend Plan ("SDP"). The SDP enables shareholders to receive their dividends in the form of common shares which are issued at a five percent discount to the prevailing market price.
   
14.
DEFICIT
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Accumulated earnings
1,183,825

 
1,054,349

 
Accumulated tax effect on redemption of restricted shares
8,791

 
8,736

 
Accumulated dividends
(5,319,926
)
 
(4,755,522
)
 
Deficit
(4,127,310
)
 
(3,692,437
)
 

 
   
CRESCENT POINT ENERGY CORP.
12

   
15.
CAPITAL MANAGEMENT
The Company’s capital structure is comprised of shareholders’ equity, long-term debt and working capital. The balance of each of these items is as follows:
 
             
($000s)
June 30, 2014

 
December 31, 2013

 
Long-term debt
2,682,061

 
1,734,114

 
Working capital deficiency (1)
219,932

 
406,134

 
Unrealized foreign exchange on translation of US dollar senior guaranteed notes
(65,164
)
 
(63,170
)
 
Net debt
2,836,829

 
2,077,078

 
Shareholders’ equity
9,204,279

 
8,500,073

 
Total capitalization
12,041,108

 
10,577,151

 
   
(1)
Working capital deficiency is calculated as accounts payable and accrued liabilities plus dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the equity settled component of dividends payable.
Crescent Point's objective for managing capital is to maintain a strong balance sheet and capital base to provide financial flexibility, stability to dividends and to position the Company for future development of the business. Ultimately, Crescent Point strives to maximize long-term stakeholder value by ensuring the Company has the financing capacity to fund projects that are expected to add value to stakeholders and distribute any excess cash that is not required for financing projects.
Crescent Point manages and monitors its capital structure and short-term financing requirements using a non-GAAP measure, the ratio of net debt to funds flow from operations. Net debt is calculated as long-term debt plus accounts payable and accrued liabilities and dividends payable, less cash, accounts receivable, prepaids and deposits and long-term investments, excluding the equity settled component of dividends payable and unrealized foreign exchange on translation of US dollar senior guaranteed notes. Funds flow from operations is calculated as cash flow from operating activities before changes in non-cash working capital, transaction costs and decommissioning expenditures. Crescent Point's objective is to maintain a net debt to funds flow from operations ratio of approximately 1.0 times. This metric is used to measure the Company's overall debt position and measure the strength of the Company's balance sheet. Crescent Point monitors this ratio and uses this as a key measure in making decisions regarding financing, capital spending and dividend levels. The Company's net debt to funds flow from operations ratio at June 30, 2014 was 1.2 times (December 31, 2013 - 1.0 times). The funds flow from operations only reflects funds flow from operations generated on acquired properties since the closing date of the acquisitions.
Crescent Point strives to provide stability to its dividends over time by managing risks associated with the oil and gas industry. To accomplish this, the Company maintains a conservative balance sheet with significant unutilized lines of credit, manages its exposure to fluctuating interest rates and foreign exchange rates on its long-term debt, and actively hedges commodity prices using a 3½ year risk management program by hedging up to 65 percent, unless otherwise approved by the Board of Directors, of after royalty volumes using a portfolio of swaps, collars and put option instruments and up to 35 percent of after royalty volumes using a combination of financial derivatives and fixed differential physical contracts to manage price differentials.
Crescent Point is subject to certain financial covenants on its credit facility and senior guaranteed notes agreements and is in compliance with all financial covenants as at June 30, 2014.
   
16.
DERIVATIVE GAINS (LOSSES)
 
                         
 
Three months ended June 30
 
 
 Six months ended June 30
 
 
($000s)
2014

 
2013

 
2014

 
2013

 
Realized losses
(72,555
)
 
(8,517
)
 
(129,034
)
 
(12,956
)
 
Unrealized gains (losses)
(81,597
)
 
43,699

 
(217,781
)
 
(34,476
)
 
Derivative gains (losses)
(154,152
)
 
35,182

 
(346,815
)
 
(47,432
)
 
   
17.
OTHER INCOME (LOSS)
 
                         
 
Three months ended June 30
 
 
Six months ended June 30
 
 
($000s)
2014

 
2013

 
2014

 
2013

 
Unrealized gain (loss) on long-term investments
5,277

 
(12,545
)
 
8,895

 
(8,909
)
 
Other loss
-

 
(793
)
 
-

 
(769
)
 
Other income (loss)
5,277

 
(13,338
)
 
8,895

 
(9,678
)
 

 
   
CRESCENT POINT ENERGY CORP.
13

   
18.
FOREIGN EXCHANGE GAIN (LOSS)
 
                         
 
Three months ended June 30
 
 
Six months ended June 30
 
 
($000s)
2014

 
2013

 
2014

 
2013

 
Realized
 
 
 
 
 
 
 
 
Foreign exchange loss on cross currency interest rate swaps
(1,251
)
 
(1,538
)
 
(1,186
)
 
(2,058
)
 
Other foreign exchange gain (loss)
(462
)
 
416

 
(307
)
 
1,014

 
Unrealized
 
 
 
 
 
 
 
 
Foreign exchange gain (loss) on translation of US dollar senior guaranteed notes
38,947

 
(34,667
)
 
(1,994
)
 
(48,903
)
 
Other foreign exchange gain (loss)
165

 
125

 
(229
)
 
(278
)
 
Foreign exchange gain (loss)
37,399

 
(35,664
)
 
(3,716
)
 
(50,225
)
 
   
19.
SHARE-BASED COMPENSATION
Restricted Share Bonus Plan
The Company has a Restricted Share Bonus Plan pursuant to which the Company may grant restricted shares to directors, officers, employees and consultants. The restricted shares vest on terms up to three years from the grant date as determined by the Board of Directors.
Restricted shareholders are eligible for monthly dividends on their restricted shares, immediately upon grant.
Deferred Share Unit Plan
The Company has a DSU plan for directors. Each DSU vests on the date of the grant, however, the settlement of the DSU occurs following a change of control or when the individual ceases to be a director of the Company. Deferred Share Units are settled in cash based on the prevailing Crescent Point share price.
The following table reconciles the number of restricted shares and DSUs for the six months ended June 30, 2014:
 
             
 
Restricted Shares

 
Deferred Share Units

 
Balance, beginning of period
2,588,143

 
75,380

 
Granted
2,479,272

 
2,214

 
Adjustment in accordance with grant
-

 
(8,377
)
 
Redeemed
(1,078,148
)
 
-

 
Forfeited
(46,217
)
 
-

 
Balance, end of period
3,943,050

 
69,217

 
For the six months ended June 30, 2014, the Company calculated total share-based compensation, net of estimated forfeitures and forfeiture true-ups, of $67.9 million (June 30, 2013 - $33.2 million), of which $14.3 million was capitalized (June 30, 2013 - $7.8 million).
   
20.
PER SHARE AMOUNTS
The following table summarizes the weighted average shares used in calculating net income per share:
 
                         
 
Three months ended June 30
 
 
 Six months ended June 30
 
 
 
2014

 
2013

 
2014

 
2013

 
Weighted average shares – basic
407,544,211

 
383,536,286

 
402,205,762

 
380,953,951

 
Dilutive impact of restricted shares
2,506,849

 
1,547,548

 
2,556,678

 
1,467,176

 
Weighted average shares – diluted
410,051,060

 
385,083,834

 
404,762,440

 
382,421,127

 
   
21.
FINANCIAL INSTRUMENTS AND DERIVATIVES
The Company's financial assets and liabilities are comprised of cash, accounts receivable, long-term investments, reclamation fund, derivative assets and liabilities, accounts payable and accrued liabilities, dividends payable and long-term debt.
Crescent Point's derivative assets and liabilities are transacted in active markets. Crescent Point's long-term investments are transacted in active and non-active markets. The Company classifies the fair value of these transactions according to the following fair value hierarchy based on the amount of observable inputs used to value the instrument:
   
•
Level 1 - Values are based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date.

 
   
CRESCENT POINT ENERGY CORP.
14

   
•
Level 2 - Values are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date.
   
•
Level 3 - Values are based on prices or valuation techniques that are not based on observable market data.
Accordingly, Crescent Point's derivative assets and liabilities are classified as Level 2. Long-term investments are classified as Level 1, Level 2 or Level 3 depending on the valuation methods and inputs used and whether the applicable company is publicly traded or private. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy.
Crescent Point's valuation of investments in private companies is based primarily on recent trading activity in the relevant company's common shares. Crescent Point validates these valuations using a variety of peer comparison metrics and industry data. The Company's finance department is responsible for performing the valuation of financial instruments, including the calculation of Level 3 fair values. Refer to Note 4 for changes in the Company's Level 3 investments.
Discussions of the fair values and risks associated with financial assets and liabilities, as well as summarized information related to derivative positions are detailed below:
a) Carrying Amount and Fair Value of Financial Instruments
The fair value of cash, accounts receivable, reclamation fund, accounts payable and accrued liabilities and dividends payable approximate their carrying amount due to the short-term nature of those instruments. The fair value of the amounts drawn on bank credit facilities is equal to its carrying amount as the facility bears interest at floating rates and credit spreads within the facility are indicative of market rates. These financial instruments are classified as financial assets and liabilities at amortized cost and are reported at amortized cost.
The following table summarizes the carrying value of the Company's remaining financial assets and liabilities as compared to their respective fair values as of June 30, 2014:
 
                               
 
June 30, 2014 Carrying Value

 
June 30, 2014 Fair Value

 
Quoted prices in active markets for identical assets
(Level1)

 
Significant other observable inputs
(Level 2)

 
Significant unobservable inputs
 (Level 3)

 
($000s)
 
 
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Derivatives
50,566

 
50,566

 
-

 
50,566

 
-

 
Long-term investments (1)
83,124

 
83,124

 
34,949

 
-

 
48,175

 
 
133,690

 
133,690

 
34,949

 
50,566

 
48,175

 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives
348,802

 
348,802

 
-

 
348,802

 
-

 
Senior guaranteed notes (2)
1,562,407

 
1,648,456

 
-

 
1,648,456

 
-

 
 
1,911,209

 
1,997,258

 
-

 
1,997,258

 
-

 
   
(1)
Long-term investments are comprised of equity securities in public and private upstream oil and gas companies.
   
(2)
The senior guaranteed notes are classified as financial liabilities at amortized cost and are reported at amortized cost. The notes denominated in US dollars are translated to Canadian dollars at the period end exchange rate. The fair value of the notes is calculated based on current interest rates and is not recorded in the financial statements.

 
   
CRESCENT POINT ENERGY CORP.
15

The following table summarizes the carrying value of the Company's remaining financial assets and liabilities as compared to their respective fair values as of December 31, 2013:
 
                               
 
December 31, 2013 Carrying Value

 
December 31, 2013 Fair Value

 
Quoted prices in active markets for identical assets (Level1)

 
Significant other observable inputs
(Level 2)

 
Significant unobservable inputs
(Level 3)

 
($000s)
 
 
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Derivatives
51,224

 
51,224

 
-

 
51,224

 
-

 
Long-term investments (1)
74,229

 
74,229

 
24,259

 
-

 
49,970

 
 
125,453

 
125,453

 
24,259

 
51,224

 
49,970

 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives
125,234

 
125,234

 
-

 
125,234

 
-

 
Senior guaranteed notes (2)
1,187,519

 
1,202,304

 
-

 
1,202,304

 
-

 
 
1,312,753

 
1,327,538

 
-

 
1,327,538

 
-

 
   
(1)
Long-term investments are comprised of equity securities in public and private upstream oil and gas companies.
   
(2)
The senior guaranteed notes are classified as financial liabilities at amortized cost and are reported at amortized cost. The notes denominated in US dollars are translated to Canadian dollars at the period end exchange rate. The fair value of the notes is calculated based on current interest rates and is not recorded in the financial statements.
Derivative assets and liabilities
Derivative assets and liabilities arise from the use of derivative contracts. The Company's derivative financial instruments are classified as fair value through profit or loss and are reported at fair value with changes in fair value recorded in net income.
The following table summarizes the fair value as at June 30, 2014 and the change in fair value for the six months ended June 30, 2014:
 
                               
($000s)
Commodity contracts (1)

 
Interest contracts

 
CCIRS contracts (2)

 
Foreign exchange contracts

 
Total

 
Derivative assets / (liabilities), beginning of period
(111,568
)
 
(6,536
)
 
44,094

 
-

 
(74,010
)
 
Acquired through capital acquisitions
(6,445
)
 
-

 
-

 
-

 
(6,445
)
 
Unrealized change in fair value
(213,032
)
 
1,990

 
(5,690
)
 
(1,049
)
 
(217,781
)
 
Derivative assets / (liabilities), end of period
(331,045
)
 
(4,546
)
 
38,404

 
(1,049
)
 
(298,236
)
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets, end of period
2,631

 
-

 
47,935

 
-

 
50,566

 
Derivative liabilities, end of period
(333,676
)
 
(4,546
)
 
(9,531
)
 
(1,049
)
 
(348,802
)
 
   
(1)
Includes oil, gas and power contracts.
   
(2)
Includes cross currency principal swap contract.
The following table summarizes the fair value as at December 31, 2013 and the change in fair value for the year ended December 31, 2013:
 
                               
($000s)
Commodity contracts (1)

 
Interest contracts

 
CCIRS contracts (2)

 
Foreign exchange contracts

 
Total

 
Derivative assets / (liabilities), beginning of year
43,337

 
(8,518
)
 
2,840

 
207

 
37,866

 
Unrealized change in fair value
(154,905
)
 
1,982

 
41,254

 
(207
)
 
(111,876
)
 
Derivative assets / (liabilities), end of year
(111,568
)
 
(6,536
)
 
44,094

 
-

 
(74,010
)
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets, end of year
3,512

 
-

 
47,712

 
-

 
51,224

 
Derivative liabilities, end of year
(115,080
)
 
(6,536
)
 
(3,618
)
 
-

 
(125,234
)
 
   
(1)
Includes oil, gas and power contracts.
   
(2)
Includes cross currency principal swap contract.
Offsetting Financial Assets and Liabilities
Financial assets and liabilities are only offset if the Company has the legal right to offset and intends to settle on a net basis or settle the asset and liability simultaneously. The Company offsets derivative assets and liabilities when the counterparty, commodity, currency and timing of settlement are the same. The following table summarizes the gross asset and liability positions of the

 
   
CRESCENT POINT ENERGY CORP.
16

Company's financial derivatives by contract that are offset on the balance sheet as at June 30, 2014 and December 31, 2013:
 
                                     
 
June 30, 2014
 
 
December 31, 2013
 
 
($000s)
Asset

 
Liability

 
Net

 
Asset

 
Liability

 
Net

 
Gross amount
52,439

 
(350,675
)
 
(298,236
)
 
55,614

 
(129,624
)
 
(74,010
)
 
Amount offset
(1,873
)
 
1,873

 
-

 
(4,390
)
 
4,390

 
-

 
Net amount
50,566

 
(348,802
)
 
(298,236
)
 
51,224

 
(125,234
)
 
(74,010
)
 
   
b)
Risks Associated with Financial Assets and Liabilities
The Company is exposed to financial risks from its financial assets and liabilities. The financial risks include market risk relating to commodity prices, interest rates and foreign exchange rates as well as credit and liquidity risk.
Market Risk
Market risk is the risk that the fair value or future cash flows of a derivative will fluctuate because of changes in market prices. Market risk is comprised of commodity price risk, interest rate risk and foreign exchange risk as discussed below.
Commodity Price Risk
The Company is exposed to commodity price risk on crude oil and natural gas revenues as well as power on electricity consumption. As a means to mitigate the exposure to commodity price volatility, the Company has entered into various derivative agreements and physical contracts. The use of derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors.
Crude oil - To partially mitigate exposure to crude oil commodity price risk, the Company enters into option contracts and swaps, which manage the Cdn$ WTI price fluctuations. The Company also enters physical delivery and derivative WTI price differential contracts which manage the spread between US$ WTI and various stream prices. The Company manages physical delivery contracts on a month-to-month spot and on a term contract basis. As at June 30, 2014, Crescent Point had committed, on a term contract basis, to deliver an average of approximately 12,200 bbl/d of crude oil from July 2014 to March 2015.
Natural gas - To partially mitigate exposure to natural gas commodity price risk, the Company enters into AECO natural gas swaps, which manage the AECO natural gas price fluctuations.
Power - To partially mitigate exposure to electricity price changes, the Company may enter into swaps or fixed price physical delivery contracts which fix the power price.
The following table summarizes the sensitivity of the fair value of the Company's derivative positions as at June 30, 2014 and June 30, 2013 to fluctuations in commodity prices or differentials, with all other variables held constant. When assessing the potential impact of these commodity price or differential changes, the Company believes 10 percent volatility is a reasonable measure. Fluctuations in commodity prices or differentials potentially would have resulted in unrealized gains (losses) impacting income before tax as follows:
 
                         
 
Impact on Income Before Tax
 
 
Impact on Income Before Tax
 
 
($000s)
Three and six months ended June 30, 2014
 
 
Three and six months ended June 30, 2013
 
 
 
Increase 10%

 
Decrease 10%

 
Increase 10%

 
Decrease 10%

 
Commodity price
 
 
 
 
 
 
 
 
Crude oil
(340,308
)
 
326,781

 
(255,329
)
 
250,209

 
Natural gas
(9,750
)
 
9,750

 
(4,077
)
 
4,077

 
Power
190

 
(190
)
 
240

 
(240
)
 
Differential
 
 
 
 
 
 
 
 
Crude oil
435

 
(435
)
 
60

 
(60
)
 
Interest Rate Risk
The Company is exposed to interest rate risk on bank credit facilities to the extent of changes in the prime interest rate. For the three and six months ended June 30, 2014, a one percent increase or decrease in the interest rate on floating rate debt would have amounted to a $2.3 million and $4.6 million, respectively, impact on income before tax.

 
   
CRESCENT POINT ENERGY CORP.
17

The Company partially mitigates its exposure to interest rate changes by entering into interest rate swap transactions. The following sensitivities show the resulting unrealized gains (losses) and the impact on income before tax of the respective changes in the applicable forward interest rates as at June 30, 2014 and June 30, 2013 with all other variables held constant:
 
                         
 
Impact on Income Before Tax
 
 
Impact on Income Before Tax
 
 
($000s)
Three and six months ended June 30, 2014
 
 
Three and six months ended June 30, 2013
 
 
Forward interest rates
Increase 10%

 
Decrease 10%

 
Increase 10%

 
Decrease 10%

 
Interest rate swaps
201

 
(201
)
 
556

 
(556
)
 
Foreign Exchange Risk
Foreign exchange risk arises from changes in foreign exchange rates that may affect the fair value or future cash flows of the Company's financial assets or liabilities. As the Company operates in Canada and the U.S., fluctuations in the exchange rate between the US/Canadian dollars can have a significant effect on reported results. The Company is exposed to foreign exchange risk in relation to its US dollar denominated senior guaranteed notes, investment in U.S. subsidiaries and in relation to its crude oil sales.
Concurrent with the issuance of US$1.26 billion senior guaranteed notes, the Company entered into CCIRS with a syndicate of financial institutions. Under the terms of the CCIRS, the US dollar amount of the notes was fixed for purposes of interest and principal repayments at a notional amount of $1.29 billion. Concurrent with the issuance of US$30.0 million senior guaranteed notes, the Company entered a cross currency principal swap which fixed the principal repayment at a notional amount of $32.2 million.
The Company can partially mitigate its exposure to foreign exchange rate changes by entering into US dollar swaps. To partially mitigate the foreign exchange risk relating to crude oil sales, the Company has fixed crude oil contracts to settle in Cdn$ WTI.
The following sensitivities show the resulting unrealized gains (losses) and the impact on income before tax of the respective changes in the period end and applicable forward foreign exchange rates at June 30, 2014 and June 30, 2013 with all other variables held constant:
 
                           
 
 
Impact on Income Before Tax
 
 
Impact on Income Before Tax
 
 
($000s)
Exchange Rate
Three and six months ended June 30, 2014
 
 
Three and six months ended June 30, 2013
 
 
Cdn$ relative to US$
 
Increase 10%

 
Decrease 10%

 
Increase 10%

 
Decrease 10%

 
US dollar swaps
Forward
(3,828
)
 
3,828

 
(1,152
)
 
1,152

 
US dollar senior guaranteed notes
Period End
138,041

 
(138,041
)
 
103,333

 
(103,333
)
 
Cross currency interest rate swaps
Forward
(152,013
)
 
152,013

 
(114,854
)
 
114,854

 
Cross currency principal swaps
Forward
(3,225
)
 
3,225

 
(3,233
)
 
3,233

 
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. A substantial portion of the Company's accounts receivable are with customers in the oil and gas industry and are subject to normal industry credit risks. The Company monitors the creditworthiness and concentration of credit with customers of its physical oil and gas sales. The Company is authorized to transact derivative contracts with counterparties rated A (or equivalent) or better, based on the lowest rating of the three ratings providers. Should one of the Company's financial counterparties be downgraded below the A rating limit, the Chief Financial Officer will advise the Audit Committee and provide recommendations to minimize the Company's credit risk to that counterparty. The maximum credit exposure associated with accounts receivable is the total carrying amount and the maximum exposure associated with the derivative instruments approximates their fair value.
To further mitigate credit risk associated with its physical sales portfolio, Crescent Point has secured credit insurance from a global credit insurance provider. This policy provides credit coverage for approximately 35 percent of the Company's physical sales portfolio. Crescent Point believes this insurance policy is a prudent component of its formal credit policies and procedures.
Less than 2 percent of the Company's accounts receivable balance at June 30, 2014 is outstanding for more than 90 days and the Company considers the entire balance to be collectible.

 
   
CRESCENT POINT ENERGY CORP.
18

Liquidity Risk
The timing of undiscounted cash outflows relating to the financial liabilities outstanding at June 30, 2014 is outlined in the table below:
 
                               
($000s)
1 year

 
2 to 3 years

 
4 to 5 years

 
More than 5 years

 
Total

 
Accounts payable and accrued liabilities
721,396

 
-

 
-

 
-

 
721,396

 
Dividends payable
96,781

 
-

 
-

 
-

 
96,781

 
Derivative liabilities (1)
203,494

 
133,109

 
-

 
-

 
336,603

 
Senior guaranteed notes (2)
158,925

 
249,283

 
241,363

 
1,314,293

 
1,963,864

 
Bank credit facilities (3)
-

 
1,119,654

 
-

 
-

 
1,119,654

 
   
(1)
These amounts exclude undiscounted cash outflows pursuant to the CCIRS and cross currency principal swaps.
   
(2)
These amounts include the notional principal and interest payments pursuant to the CCIRS and cross currency principal swaps, which fix the amounts due in Canadian dollars.
   
(3)
These amounts exclude interest payable on amounts drawn on the bank credit facilities.
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company manages its liquidity risk through cash and debt management. As disclosed in Note 15, Crescent Point targets an average net debt to funds flow from operations ratio of approximately 1.0 times.
In managing liquidity risk, the Company has access to a wide range of funding at competitive rates through capital markets and banks. At June 30, 2014, the Company had available unused borrowing capacity on bank credit facilities of approximately $973.3 million, including $3.9 million letters of credit drawn on the facility. Crescent Point believes it has sufficient funding to meet its foreseeable spending requirements.
Included in the Company's bank credit facilities balance of $1.12 billion at June 30, 2014 (December 31, 2013 - $546.6 million) are obligations of $1.02 billion (December 31, 2013 - $460.0 million) of bankers' acceptances, obligations of $102.8 million (December 31, 2013 - $89.8 million) for borrowings under the operating and syndicated prime loans, partially offset by prepaid interest on bankers' acceptances of $1.8 million (December 31, 2013 - $1.1 million) and prepaid credit facility renewal fees of $1.4 million (December 31, 2013 - $2.1 million). These amounts are fully supported and management expects that they will continue to be supported by revolving credit facilities that have no repayment requirements until maturity, other than interest.
   
c)
Derivative Contracts
The Company enters into fixed price oil, gas, power, foreign currency, interest rate, cross currency interest rate, cross currency principal and crude oil differential contracts to manage its exposure to fluctuations in the price of crude oil, gas, power, foreign exchange and interest on debt.
The following is a summary of the derivative contracts in place as at June 30, 2014:
 
                                     
Financial WTI Crude Oil Derivative Contracts – Canadian Dollar (1)
Term
Volume
(bbls/d)

 
Average
Swap
Price
($/bbl)

 
Average Collar
Sold
Call Price
($/bbl)

 
Average Collar
Bought
Put Price
($/bbl)

 
Average Bought
Put Price
($/bbl)

 
Average
Put
Premium
($/bbl)

 
2014 July - December
63,950

 
96.99

 
103.08

 
88.16

 
95.71

 
4.27

 
2015
41,116

 
95.12

 
98.18

 
87.69

 
-

 
-

 
2016
22,492

 
91.05

 
-

 
-

 
-

 
-

 
2017 January - June
4,492

 
90.29

 
-

 
-

 
-

 
-

 
   
(1)
The volumes and prices reported are the weighted average volumes and prices for the period.
 
                       
Financial WTI Crude Oil Differential Derivative Contracts – Canadian Dollar (1)
Term
 
Volume
(bbls/d)

 
Contract
 
Basis
 
Fixed Differential ($/bbl)

 
2014 July - December
 
1,000

 
Basis Swap
 
WCS
 
(20.93
)
 
   
(1)
The volumes and prices reported are the weighted average volumes and prices for the period.


 
   
CRESCENT POINT ENERGY CORP.
19

 
         
Financial AECO Natural Gas Derivative Contracts – Canadian Dollar (1)
Average Volume
(GJ/d)
 
Average Swap Price
($/GJ)
 
Term
 
2014 July - December
24,000
 
3.55
 
2015
29,000
 
3.62
 
2016
26,339
 
3.59
 
2017 January - March
24,000
 
3.56
 
   
(1)
The volumes and prices reported are the weighted average volumes and prices for the period.
 
           
Financial Power Derivative Contracts – Canadian Dollar
 
Volume
(MW/h)
 
Fixed Rate
($/MW/h)
 
Term
Contract
 
2014 July - December
Swap
3.0
 
75.00
 
2015
Swap
3.0
 
49.50
 
 
           
Foreign Exchange Forward Contracts (1)
 
Amount (US$)
 
Cdn$/US$
 
Settlement Date
Contract
 
July 3, 2014
Swap
7,000,000
 
1.1031
 
August 5, 2014
Swap
10,000,000
 
1.0889
 
September 4, 2014
Swap
7,000,000
 
1.1021
 
October 3, 2014
Swap
5,000,000
 
1.0984
 
November 4, 2014
Swap
4,000,000
 
1.1079
 
December 3, 2014
Swap
3,000,000
 
1.0960
 
   
(1)
The amounts and exchange rates reported are the weighted average amounts and exchange rates for the period.
 
           
Financial Interest Rate Derivative Contracts – Canadian Dollar
 
Notional Principal
($)
 
Fixed Annual
Rate (%)
 
Term
Contract
 
 
July 2014 – May 2015
Swap
25,000,000
 
2.90
 
July 2014 – May 2015
Swap
25,000,000
 
3.50
 
July 2014 – May 2015
Swap
50,000,000
 
3.09
 
July 2014 – June 2015
Swap
50,000,000
 
3.78
 
July 2014 – July 2015
Swap
50,000,000
 
3.63
 
 
                           
Financial Cross Currency Interest Rate Derivative Contracts
 
 
 
 
 
Term
Contract
Receive Notional Principal
(US$)

 
Fixed Annual
Rate (US%)

 
Pay Notional Principal
(Cdn$)

 
Fixed Annual
Rate (Cdn%)

 
July 2014 – March 2015
Swap
37,500,000

 
4.71

 
38,287,500

 
5.24

 
July 2014 – April 2016
Swap
52,000,000

 
3.93

 
50,128,000

 
4.84

 
July 2014 – March 2017
Swap
67,500,000

 
5.48

 
68,917,500

 
5.89

 
July 2014 – April 2018
Swap
31,000,000

 
4.58

 
29,884,000

 
5.32

 
July 2014 – June 2018
Swap
20,000,000

 
2.65

 
20,350,000

 
3.52

 
July 2014 – May 2019
Swap
68,000,000

 
3.39

 
66,742,000

 
4.53

 
July 2014 – March 2020
Swap
155,000,000

 
6.03

 
158,255,000

 
6.45

 
July 2014 – April 2021
Swap
82,000,000

 
5.13

 
79,048,000

 
5.83

 
July 2014 – June 2021
Swap
52,500,000

 
3.29

 
56,348,250

 
3.59

 
July 2014 – May 2022
Swap
170,000,000

 
4.00

 
166,855,000

 
5.03

 
July 2014 – June 2023
Swap
270,000,000

 
3.78

 
274,725,000

 
4.32

 
July 2014 – June 2024
Swap
257,500,000

 
3.75

 
276,374,750

 
4.03

 

 
   
CRESCENT POINT ENERGY CORP.
20

 
                   
Financial Cross Currency Principal Derivative Contracts
 
 
 
 
Settlement Date
Contract
 
Receive Notional Principal
(US$)

 
Pay Notional Principal
(Cdn$)

 
May 22, 2022
Swap
 
30,000,000

 
32,241,000

 
Concurrent with the issuance of US$1.26 billion senior guaranteed notes, the Company entered into CCIRS with a syndicate of financial institutions. Under the terms of the CCIRS, the US dollar amount of the notes was fixed for purposes of interest and principal repayments at a notional amount of $1.29 billion. Concurrent with the issuance of US$30.0 million senior guaranteed notes, the Company entered a cross currency principal swap which fixed the principal repayment at a notional amount of $32.2 million.
   
22.
RELATED PARTY TRANSACTIONS
All related party transactions are recorded at the exchange amount.
During the three and six months ended June 30, 2014, Crescent Point recorded $0.2 million and $0.5 million, respectively, (June 30, 2013 - $0.3 million and $0.5 million, respectively) of legal fees in the normal course of business to a law firm of which a partner is the Company's corporate secretary. Crescent Point also recorded $0.1 million and $0.1 million during the three and six months, respectively, ended June 30, 2014 (June 30, 2013 - $0.1 million and $0.3 million, respectively) of legal fees in the normal course of business to a law firm of which a partner is a director of the Company.
   
23.
SUPPLEMENTAL DISCLOSURES
Cash Flow Statement Presentation
 
                         
 
Three months ended June 30
 
 
Six months ended June 30
 
 
($000s)
2014

 
2013

 
2014

 
2013

 
Operating activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Accounts receivable
18,040

 
6,137

 
(45,967
)
 
(49,381
)
 
Prepaids and deposits
2,642

 
196

 
(4,131
)
 
1,542

 
Accounts payable and accrued liabilities
(11,348
)
 
(44,343
)
 
61,776

 
20,283

 
Other long-term liabilities
14,293

 
-

 
19,439

 
-

 
 
23,627

 
(38,010
)
 
31,117

 
(27,556
)
 
Investing activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Accounts receivable
(1,033
)
 
12,819

 
(2,401
)
 
16,347

 
Accounts payable and accrued liabilities
(152,717
)
 
(74,236
)
 
(165,694
)
 
(57,429
)
 
 
(153,750
)
 
(61,417
)
 
(168,095
)
 
(41,082
)
 
Financing activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Dividends payable
5,219

 
1,229

 
5,932

 
2,620

 
   
24.
GEOGRAPHICAL DISCLOSURE
As at June 30, 2014, Crescent Point's non-current assets related to the U.S. foreign operations is $1.7 billion (December 31, 2013 - $1.6 billion). For the three and six months ended June 30, 2014, Crescent Point's oil and gas revenue related to the U.S. foreign operations is $93.4 million and $179.2 million, respectively (June 30, 2013 - $77.6 million and $145.6 million, respectively).

 
   
CRESCENT POINT ENERGY CORP.
21

   
25.
SUBSEQUENT EVENTS
Share Purchase and Sale Agreement to acquire T. Bird Oil Ltd.
On July 18, 2014, Crescent Point entered a share purchase and sale agreement to acquire all of the issued and outstanding shares of T. Bird Oil Ltd. (“T. Bird”), a private oil and gas company with properties in southeast Saskatchewan and Manitoba. Total consideration is estimated to be approximately $88.0 million, including the issuance of approximately 1.5 million common shares plus assumed net debt. The T. Bird acquisition is expected to close on or about August 13, 2014.
Acquisition of Viewfield Bakken and Flat Lake Assets
On July 30, 2014, Crescent Point completed the acquisition of certain assets in the Viewfield Bakken and Flat Lake resource plays in southeast Saskatchewan for cash consideration of $99.1 million.
Increase in Combined Credit Facilities
On August 12, 2014, the total amount available under the Company’s syndicated credit facility and operating credit facility was increased to a total of $2.6 billion. Refer to Note 10 for additional information on the combined credit facilities.

 
   
CRESCENT POINT ENERGY CORP.
22

 
     
Directors
Peter Bannister, Chairman (1) (3)
Rene Amirault (2) (4)
Ken Cugnet (3) (4) (5)
Hugh Gillard (1) (2) (5)
Robert Heinemann (2) (3) (5)
Gerald Romanzin (1) (2)
Scott Saxberg (4)
Greg Turnbull (3) (5)
(1) Member of the Audit Committee of the Board of Directors
(2) Member of the Compensation Committee of the Board of Directors
(3) Member of the Reserves Committee of the Board of Directors
(4) Member of the Health, Safety and Environment Committee of the Board of Directors
(5) Member of the Corporate Governance and Nominating Committee
Officers
Scott Saxberg
President and Chief Executive Officer
Greg Tisdale
Chief Financial Officer
C. Neil Smith
Chief Operating Officer
Brad Borggard
Vice President, Corporate Planning
Derek Christie
Vice President, Exploration and Geosciences
Ryan Gritzfeldt
Vice President, Engineering and Business Development East
Ken Lamont
Vice President, Finance and Treasurer
Tamara MacDonald
Vice President, Land
Trent Stangl
Vice President, Marketing and Investor Relations
Steve Toews
Vice President, Engineering and Business Development West
Mark Eade
Corporate Secretary
Head Office
Suite 2800, 111 - 5th Avenue S.W.
Calgary, Alberta T2P 3Y6
Tel: (403) 693-0020
Fax: (403) 693-0070
Toll Free: (888) 693-0020
Banker
The Bank of Nova Scotia
Calgary, Alberta
 
Auditor
PricewaterhouseCoopers LLP
Calgary, Alberta
Legal Counsel
Norton Rose Fulbright Canada LLP
Calgary, Alberta
Evaluation Engineers
GLJ Petroleum Consultants Ltd.
Calgary, Alberta
Sproule Associates Ltd.
Calgary, Alberta
Registrar and Transfer Agent
Investors are encouraged to contact Crescent Point's Registrar and Transfer Agent for information regarding their security holdings:
Olympia Trust Company
2300, 125 - 9th Avenue S.E.
Calgary, Alberta T2G 0P6
Tel: (403) 261-0900
Stock Exchanges
Toronto Stock Exchange - TSX
New York Stock Exchange - NYSE
Stock Symbol
CPG
Investor Contacts
Scott Saxberg
President and Chief Executive Officer
(403) 693-0020
Greg Tisdale
Chief Financial Officer
(403) 693-0020
Trent Stangl
Vice President, Marketing and Investor Relations
(403) 693-0020


 
   
CRESCENT POINT ENERGY CORP.
23