EX-99.1 2 exh99_1.htm EXHIBIT 99.1 CPG Q2 2015 FS
Exhibit 99.1
CONSOLIDATED BALANCE SHEETS
 
 
As at
 
 
June 30,

 
December 31,

 
(UNAUDITED) (Cdn$000s)
Notes
2015

 
2014

 
ASSETS
 
 
 
 
 
Cash
 
20,625

 
3,953

 
Accounts receivable
 
383,707

 
418,688

 
Prepaids and deposits
 
7,782

 
6,519

 
Derivative asset
22
251,685

 
520,601

 
Total current assets
 
663,799

 
949,761

 
Long-term investments
4
61,676

 
49,878

 
Derivative asset
22
259,272

 
283,379

 
Other long-term assets
5
54,718

 
59,577

 
Exploration and evaluation
6, 7
646,450

 
622,509

 
Property, plant and equipment
7, 8
16,034,866

 
14,250,062

 
Goodwill
9
251,919

 
251,919

 
Total assets
 
17,972,700

 
16,467,085

 
LIABILITIES
 
 
 
 
 
Accounts payable and accrued liabilities
 
671,016

 
839,228

 
Dividends payable
13
115,927

 
102,697

 
Current portion of long-term debt
10
1,048,583

 
93,504

 
Derivative liability
22
987

 
3,389

 
Decommissioning liability
12
32,852

 
52,280

 
Total current liabilities
 
1,869,365

 
1,091,098

 
Long-term debt
10
2,936,501

 
2,849,570

 
Derivative liability
22
22,133

 
215

 
Other long-term liabilities
11, 20
57,965

 
46,055

 
Decommissioning liability
12
1,189,374

 
971,078

 
Deferred income tax
19
1,194,844

 
1,348,180

 
Total liabilities
 
7,270,182

 
6,306,196

 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
Shareholders’ capital
13
15,512,458

 
14,157,519

 
Contributed surplus
 
111,622

 
118,045

 
Deficit
14
(5,289,483
)
 
(4,357,053
)
 
Accumulated other comprehensive income
 
367,921

 
242,378

 
Total shareholders' equity
 
10,702,518

 
10,160,889

 
Total liabilities and shareholders' equity
 
17,972,700

 
16,467,085

 
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
2015

 
2014

 
2015

 
2014

 
REVENUE AND OTHER INCOME
 
 
 
 
 
 
 
 
 
Oil and gas sales
 
776,158

 
1,147,880

 
1,389,791

 
2,176,809

 
Royalties
 
(118,723
)
 
(202,371
)
 
(217,056
)
 
(383,077
)
 
Oil and gas revenue
 
657,435

 
945,509

 
1,172,735

 
1,793,732

 
Derivative losses
16, 22
(246,252
)
 
(154,152
)
 
(33,279
)
 
(346,815
)
 
Other income (loss)
17
(6,186
)
 
5,277

 
17,511

 
8,895

 
 
 
404,997

 
796,634

 
1,156,967

 
1,455,812

 
EXPENSES
 
 
 
 
 
 
 
 
 
Operating
 
162,311

 
157,832

 
326,695

 
305,391

 
Transportation
 
32,084

 
30,769

 
64,658

 
55,989

 
General and administrative
 
30,900

 
29,941

 
53,165

 
47,320

 
Interest on long-term debt
 
33,249

 
25,852

 
66,950

 
47,457

 
Foreign exchange (gain) loss
18
(32,718
)
 
(37,399
)
 
97,951

 
3,716

 
Share-based compensation
20
15,549

 
33,406

 
35,529

 
53,601

 
Depletion, depreciation and amortization
6, 8
412,766

 
409,642

 
824,670

 
783,940

 
Accretion on decommissioning liability
12
5,406

 
4,750

 
11,180

 
9,480

 
 
 
659,547

 
654,793

 
1,480,798

 
1,306,894

 
Net income (loss) before tax
 
(254,550
)
 
141,841

 
(323,831
)
 
148,918

 
 
 
 
 
 
 
 
 
 
 
Tax expense (recovery)
 
 
 
 
 
 
 
 
 
Current
 
222

 
5

 
222

 
5

 
Deferred
19
(14,324
)
 
43,250

 
(37,541
)
 
19,437

 
Net income (loss)
 
(240,448
)
 
98,586

 
(286,512
)
 
129,476

 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss
 
 
 
 
 
 
 
 
Foreign currency translation of foreign operations
 
(30,450
)
 
(59,370
)
 
125,543

 
1,007

 
Comprehensive income (loss)
 
(270,898
)
 
39,216

 
(160,969
)
 
130,483

 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share
21
 
 
 
 
 
 
 
 
Basic
 
(0.53
)
 
0.24

 
(0.63
)
 
0.32

 
Diluted
 
(0.53
)
 
0.24

 
(0.63
)
 
0.32

 
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

 
Total
shareholders’
equity

 
December 31, 2014
 
14,157,519

 
118,045

 
(4,357,053
)
 
242,378

 
10,160,889

 
Issued for cash
13
660,060

 
 
 
 
 
 
 
660,060

 
Issued on capital acquisitions
13
468,730

 
 
 
 
 
 
 
468,730

 
Issued pursuant to the DRIP (1) and SDP (2)
13
194,435

 


 
1,989

 


 
196,424

 
Redemption of restricted shares
13
51,409

 
(52,376
)
 
6

 


 
(961
)
 
Share issue costs, net of tax
 
(19,695
)
 


 


 


 
(19,695
)
 
Share-based compensation
20


 
47,148

 


 


 
47,148

 
Forfeit of restricted shares
20


 
(1,195
)
 


 


 
(1,195
)
 
Net income (loss)
 


 


 
(286,512
)
 


 
(286,512
)
 
Dividends ($1.38 per share)
 


 


 
(647,913
)
 


 
(647,913
)
 
Foreign currency translation adjustment
 


 


 


 
125,543

 
125,543

 
June 30, 2015
 
15,512,458

 
111,622

 
(5,289,483
)
 
367,921

 
10,702,518

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
11,990,305

 
109,564

 
(3,692,437
)
 
92,641

 
8,500,073

 
Issued on capital acquisitions
 
908,905

 


 


 


 
908,905

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

 


 


 


 
162,582

 
Redemption of restricted shares
 
44,475

 
(45,228
)
 
55

 


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


 


 


 
(384
)
 
Share-based compensation
 


 
68,552

 


 


 
68,552

 
Forfeit of restricted shares
 


 
(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

 
(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
2015

 
2014

 
2015

 
2014

 
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
 
 
 
 
 
 
 
 
 
Net income (loss)
 
(240,448
)
 
98,586

 
(286,512
)
 
129,476

 
Items not affecting cash
 
 
 
 
 
 
 
 
 
Other (income) loss
17
6,186

 
(5,277
)
 
(17,511
)
 
(8,895
)
 
Deferred tax expense (recovery)
 
(14,324
)
 
43,250

 
(37,541
)
 
19,437

 
Share-based compensation
20
15,549

 
33,406

 
35,529

 
53,601

 
Depletion, depreciation and amortization
 
412,766

 
409,642

 
824,670

 
783,940

 
Accretion on decommissioning liability
 
5,406

 
4,750

 
11,180

 
9,480

 
Unrealized losses on derivatives
16, 22
359,155

 
81,597

 
312,539

 
217,781

 
Unrealized (gain) loss on foreign exchange
18
(31,001
)
 
(38,947
)
 
99,699

 
1,994

 
Non-cash lease inducement
 
2,216

 
-

 
6,013

 
-

 
Decommissioning expenditures
 
(2,481
)
 
(4,149
)
 
(7,408
)
 
(17,310
)
 
Change in non-cash working capital
24
(21,388
)
 
23,627

 
(50,313
)
 
31,117

 
 
 
491,636

 
646,485

 
890,345

 
1,220,621

 
INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
Development capital and other expenditures
 
(338,665
)
 
(293,210
)
 
(909,260
)
 
(873,772
)
 
Capital acquisitions, net
7
(1,514
)
 
(306,975
)
 
(17,094
)
 
(337,578
)
 
Other long-term assets
5
(3,691
)
 
(15,968
)
 
6,176

 
(15,501
)
 
Investments
4
2,035

 
-

 
2,035

 
-

 
Change in non-cash working capital
24
(9,548
)
 
(153,750
)
 
(110,821
)
 
(168,095
)
 
 
 
(351,383
)
 
(769,903
)
 
(1,028,964
)
 
(1,394,946
)
 
FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
Issue of shares, net of issue costs
 
632,978

 
(647
)
 
632,428

 
(1,272
)
 
Increase (decrease) in long-term debt
 
(567,727
)
 
338,308

 
(41,535
)
 
585,327

 
Cash dividends
 
(227,511
)
 
(203,814
)
 
(451,488
)
 
(401,822
)
 
Change in non-cash working capital
24
10,612

 
5,219

 
13,230

 
5,932

 
 
 
(151,648
)
 
139,066

 
152,635

 
188,165

 
Impact of foreign currency on cash balances
 
(209
)
 
(285
)
 
2,656

 
249

 
INCREASE (DECREASE) IN CASH
 
(11,604
)
 
15,363

 
16,672

 
14,089

 
CASH AT BEGINNING OF PERIOD
 
32,229

 
14,667

 
3,953

 
15,941

 
CASH AT END OF PERIOD
 
20,625

 
30,030

 
20,625

 
30,030

 
See accompanying notes to the consolidated financial statements.

Supplementary Information:
Cash taxes (paid) recovered
(38
)
 
1,713

 
(57
)
 
1,390

 
Cash interest paid
(38,721
)
 
(29,144
)
 
(66,512
)
 
(46,356
)
 


CRESCENT POINT ENERGY CORP.
4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    
June 30, 2015 (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 2000, 585 - 8th Ave S.W., Calgary, Alberta, Canada, T2P 1G1.
These interim consolidated financial statements were approved and authorized for issue by the Company's Board of Directors on August 12, 2015.
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, 2014. 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, 2014.
The policies applied in these interim consolidated financial statements are based on IFRS issued and outstanding as of August 12, 2015, 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 similar nature of products produced, production processes and economic characteristics between the Company's Canadian and U.S. operations.
3.
CHANGES IN ACCOUNTING POLICIES
In future accounting periods, 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. In July 2015, the IASB announced an amendment to IFRS 15, deferring the effective date of the standard by one year to annual periods beginning on or after January 1, 2018 with early adoption still permitted. IFRS 15 will be adopted by the Company on January 1, 2018 and the Company is currently evaluating the impact of the standard on the consolidated financial statements.
•
IFRS 9 Financial Instruments - IFRS 9 was amended in July 2014 to include guidance to assess and recognize impairment losses on financial assets based on an expected loss model. The amendments are effective for fiscal years beginning on or after January 1, 2018 with earlier adoption permitted. This amendment will be adopted by the Company on January 1, 2018 and the Company is currently evaluating the impact of the amendment on the consolidated financial statements.

CRESCENT POINT ENERGY CORP.
5

4.
LONG-TERM INVESTMENTS
($000s)
June 30, 2015

 
December 31, 2014

 
Investments in public companies, beginning of period
21,024

 
24,259

 
Acquired through capital acquisitions
2,556

 
-

 
Dispositions
(1,295
)
 
-

 
Unrealized gain (loss) recognized in other income (loss)
3,406

 
(3,235
)
 
Investments in public companies, end of period
25,691

 
21,024

 
 
 
 
 
 
Investments in private companies, beginning of period
28,854

 
49,970

 
Unrealized gain (loss) recognized in other income (loss)
7,131

 
(21,116
)
 
Investments in private companies, end of period
35,985

 
28,854

 
 
 
 
 
 
Long-term investments, end of period
61,676

 
49,878

 
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, 2015, the investments are recorded at a fair value of $25.7 million which is $15.1 million more than the original cost of the investments. At December 31, 2014, the investments were recorded at a fair value of $21.0 million which was $82.9 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, 2015, the investments are recorded at a fair value of $36.0 million which is $31.0 million less than the original cost of the investments. At December 31, 2014, the investments were recorded at a fair value of $28.9 million which was $38.1 million less than the original cost of the investments. See Note 22 - "Financial Instruments and Derivatives" for additional information regarding the Company's Level 3 investments.
5.
OTHER LONG-TERM ASSETS
($000s)
June 30, 2015

 
December 31, 2014

 
Reclamation fund
43,161

 
47,800

 
Other receivables
11,557

 
11,777

 
Other long-term assets
54,718

 
59,577

 
a)
Reclamation fund
The following table reconciles the reclamation fund:
($000s)
June 30, 2015

 
December 31, 2014

 
Balance, beginning of period
47,800

 
26,181

 
Contributions
8,279

 
60,318

 
Acquired through capital acquisitions
1,317

 
-

 
Expenditures
(14,235
)
 
(38,699
)
 
Balance, end of period
43,161

 
47,800

 
b)
Other receivables
At June 30, 2015, the Company had investment tax credits of $11.6 million (December 31, 2014 - $11.8 million).

CRESCENT POINT ENERGY CORP.
6

6.
EXPLORATION AND EVALUATION ASSETS
($000s)
June 30, 2015

 
December 31, 2014

 
Exploration and evaluation assets at cost
1,923,554

 
1,789,812

 
Accumulated amortization
(1,277,104
)
 
(1,167,303
)
 
Net carrying amount
646,450

 
622,509

 
 
 
 
 
 
Reconciliation of movements during the period
 
 
 
 
Cost, beginning of period
1,789,812

 
1,590,298

 
Accumulated amortization, beginning of period
(1,167,303
)
 
(901,974
)
 
Net carrying amount, beginning of period
622,509

 
688,324

 
 
 
 
 
 
Net carrying amount, beginning of period
622,509

 
688,324

 
Acquisitions through business combinations, net
108,121

 
65,029

 
Additions
249,386

 
578,942

 
Transfers to property, plant and equipment
(258,448
)
 
(486,466
)
 
Amortization
(94,754
)
 
(248,854
)
 
Foreign exchange
19,636

 
25,534

 
Net carrying amount, end of period
646,450

 
622,509

 
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, 2015, $646.5 million remains in E&E assets after $258.4 million was transferred to property, plant and equipment ("PP&E") following the determination of technical feasibility during the six months ended June 30, 2015 (year ended December 31, 2014 - $622.5 million and $486.5 million, respectively).
Impairment test of exploration and evaluation assets
There were no indicators of impairment at June 30, 2015.
7.
CAPITAL ACQUISITIONS AND DISPOSITIONS
If the material business combination outlined below under Corporate Acquisitions had closed on January 1, 2015, 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, 2015 would have been approximately $1.6 billion and $869.1 million, respectively. This pro-forma information is not necessarily indicative of the results should the material business combinations have actually occurred on January 1, 2015.
In the six months ended June 30, 2015, the Company incurred $9.7 million (June 30, 2014 - $10.0 million) of transaction costs related to business combinations that are recorded as general and administrative expenses.

CRESCENT POINT ENERGY CORP.
7

a) Corporate Acquisitions
Legacy Oil + Gas Inc.
On June 30, 2015, Crescent Point completed the acquisition, by way of plan of arrangement, of all issued and outstanding common shares of Legacy Oil + Gas Inc. ("Legacy"), a public oil and gas company with properties in southeast Saskatchewan, Manitoba, Alberta and North Dakota. Total consideration of approximately $1.48 billion included the issuance of approximately 18.2 million common shares, anticipated cash adjustments to shareholders of $19.4 million, assumed long-term debt and working capital ($1.35 billion was allocated to PP&E and $95.4 million was allocated to E&E assets).
($000s)
 
 
 
 
Fair value of net assets acquired (1)
 
 
 
 
Working capital
 
 
(8,865
)
 
Long-term investments
 
 
2,556

 
Other long-term assets
 
 
1,317

 
Property, plant and equipment
 
 
1,354,252

 
Exploration and evaluation

 
 
95,385

 
Deferred income tax asset
 
 
108,875

 
Long-term debt
 
 
(983,719
)
 
Other long-term liabilities
 
 
(6,793
)
 
Decommissioning liability
 
 
(76,023
)
 
Total net assets acquired (2)
 
 
486,985

 
Consideration
 
 
 
 
Shares issued (18,229,428 common shares)
 
 
467,585

 
Accrued cash adjustment
 
 
19,400

 
Total purchase price
 
 
486,985

 
(1)
The above amounts are estimates, which were made by management at the time of the preparation of these financial statements based on information then available. Amendments may be made as amounts subject to estimates are finalized.
(2)
Total net assets acquired excludes approximately $35.0 million of commitments related to a building lease and approximately $2.9 million related to capital commitments.
Oil and gas sales and oil and gas sales less royalties, transportation and operating expenses from the acquisition date to June 30, 2015 includes nil and nil, respectively, attributable to the Legacy acquisition.
As at June 30, 2015, the acquired long-term debt consisted of $685.1 million drawn on a bank credit facility and a credit note with a fair value of $298.6 million.
The acquired bank credit facility consisted of a secured credit facility with a syndicate of Canadian Banks, for a total amount available under the credit facility of $725.0 million with a maturity date of April 30, 2016. The Company settled the acquired bank credit facility on July 2, 2015.
The acquired credit note consisted of US$200.0 million of unsecured, five year term credit notes due on November 15, 2017, issued to CPPIB Credit Investments Inc., a wholly-owned subsidiary of CPP Investment. The acquired credit note had a 7.5 percent coupon rate and a 1.5 percent redemption premium on the principal debt. The change in control resulted in an additional US$39.4 million payment owing on settlement of the credit note. The Company settled the acquired credit note, including the change of control payment, on July 8, 2015.
b) Minor Property Acquisitions and Dispositions
Crescent Point completed minor property acquisitions and dispositions during the six months ended June 30, 2015 for net consideration of $16.5 million ($10.2 million was allocated to PP&E and $12.7 million was allocated to E&E assets, including $0.2 million related to decommissioning liability). 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, 2015

 
December 31, 2014

 
Development and production assets
22,449,586

 
19,891,460

 
Corporate assets
96,941

 
87,692

 
Property, plant and equipment at cost
22,546,527

 
19,979,152

 
Accumulated depletion, depreciation and impairment
(6,511,661
)
 
(5,729,090
)
 
Net carrying amount
16,034,866

 
14,250,062

 
 
 
 
 
 
Reconciliation of movements during the period
 
 
 
 
 
 
 
 
 
Development and production assets
 
 
 
 
Cost, beginning of period
19,891,460

 
14,964,220

 
Accumulated depletion and impairment, beginning of period
(5,708,032
)
 
(3,715,311
)
 
Net carrying amount, beginning of period
14,183,428

 
11,248,909

 
 
 
 
 
 
Net carrying amount, beginning of period
14,183,428

 
11,248,909

 
Acquisitions through business combinations, net
1,364,698

 
2,420,584

 
Additions
777,285

 
1,871,391

 
Dispositions
(222
)
 
(283
)
 
Transfers from exploration and evaluation assets
258,448

 
486,466

 
Depletion
(725,791
)
 
(1,380,412
)
 
Impairment
-

 
(588,200
)
 
Foreign exchange
105,299

 
124,973

 
Net carrying amount, end of period
15,963,145

 
14,183,428

 
 
 
 
 
 
Cost, end of period
22,449,586

 
19,891,460

 
Accumulated depletion and impairment, end of period
(6,486,441
)
 
(5,708,032
)
 
Net carrying amount, end of period
15,963,145

 
14,183,428

 
 
 
 
 
 
Corporate assets
 
 
 
 
Cost, beginning of period
87,692

 
26,176

 
Accumulated depreciation, beginning of period
(21,058
)
 
(15,938
)
 
Net carrying amount, beginning of period
66,634

 
10,238

 
 
 
 
 
 
Net carrying amount, beginning of period
66,634

 
10,238

 
Additions
9,118

 
61,408

 
Depreciation
(4,125
)
 
(5,090
)
 
Foreign exchange
94

 
78

 
Net carrying amount, end of period
71,721

 
66,634

 
 
 
 
 
 
Cost, end of period
96,941

 
87,692

 
Accumulated depreciation, end of period
(25,220
)
 
(21,058
)
 
Net carrying amount, end of period
71,721

 
66,634

 
At June 30, 2015, future development costs of $7.8 billion (December 31, 2014 - $6.9 billion) are included in costs subject to depletion.
Direct general and administrative costs capitalized by the Company during the six months ended June 30, 2015 were $24.5 million (year ended December 31, 2014 - $41.3 million), including $10.4 million of share-based compensation costs (year ended December 31, 2014 - $18.0 million).


CRESCENT POINT ENERGY CORP.
9

Impairment test of property, plant and equipment
There were no indicators of impairment at June 30, 2015.
9.
GOODWILL
At June 30, 2015, the Company had goodwill of $251.9 million (December 31, 2014 - $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, 2015

 
December 31, 2014

 
Bank credit facilities
926,404

 
1,261,065

 
Senior guaranteed notes
2,074,961

 
1,682,009

 
Acquired through capital acquisitions
983,719

 
-

 
Long-term debt
3,985,084

 
2,943,074

 
Long-term debt due within one year (1)
1,048,583

 
93,504

 
Long-term debt due beyond one year
2,936,501

 
2,849,570

 
(1)
Includes long-term debt of $983.7 million acquired through capital acquisitions which was settled on July 2, 2015 and July 8, 2015.
Bank Credit Facilities
The Company has a syndicated unsecured credit facility with sixteen banks and an operating credit facility with one Canadian chartered bank, for a total amount available under the combined facilities of $3.6 billion. The syndicated unsecured credit facility also includes 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 earnings before interest, taxes, depletion, depreciation and amortization, adjusted for certain non-cash items ("EBITDA"). 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 8, 2018. The operating credit facility constitutes a revolving facility for a three year term which is extendible annually; the current maturity date is June 8, 2018. The combined credit facilities and senior guaranteed notes have covenants which restrict the Company's ratio of senior debt to EBITDA to a maximum of 3.5:1.0, the ratio of total debt to EBITDA to a maximum of 4:0:1.0 and the ratio of senior debt to capital, adjusted for certain non-cash items, to a maximum of 0.55:1.0. The Company is in compliance with all debt covenants at June 30, 2015.
The Company had letters of credit in the amount of $13.7 million outstanding at June 30, 2015.
The Company manages its credit facilities through a combination of bankers' acceptance loans and interest rate swaps.

CRESCENT POINT ENERGY CORP.
10

Senior Guaranteed Notes
The Company has closed private offerings of senior guaranteed notes raising total gross proceeds of US$1.51 billion and Cdn$197.0 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, 2015

 
December 31, 2014

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

 
50,000

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

 
43,504

 
US$52,000
April 14, 2016
3.93
%
October 14 and April 14
64,864

 
60,325

 
US$67,500
March 24, 2017
5.48
%
September 24 and March 24
84,200

 
78,306

 
US$31,000
April 14, 2018
4.58
%
October 14 and April 14
38,669

 
35,963

 
US$20,000
June 12, 2018
2.65
%
December 12 and June 12
24,948

 
23,202

 
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
84,823

 
78,887

 
US$155,000
March 24, 2020
6.03
%
September 24 and March 24
193,347

 
179,816

 
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
102,287

 
95,128

 
US$52,500
June 20, 2021
3.29
%
December 20 and June 20
65,489

 
60,905

 
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
249,480

 
232,020

 
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
336,798

 
313,227

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

 
40,000

 
US$257,500
June 20, 2024
3.75
%
December 20 and June 20
321,206

 
298,726

 
Cdn$65,000
April 22, 2025
3.94
%
October 22 and April 22
65,000

 
-

 
US$230,000
April 22, 2025
4.08
%
October 22 and April 22
286,902

 
-

 
US$20,000
April 22, 2027
4.18
%
October 22 and April 22
24,948

 
-

 
Senior guaranteed notes
 
 
2,074,961

 
1,682,009

 
Senior guaranteed notes due within one year
 
64,864

 
93,504

 
Senior guaranteed notes due beyond one year
 
2,010,097

 
1,588,505

 
Concurrent with the issuance of US$1.48 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 $1.56 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 22 - “Financial Instruments and Derivatives”.
Acquired through Capital Acquisitions
See Note 7 - "Capital Acquisitions and Dispositions" for additional information regarding the long-term debt acquired through capital acquisitions.
11.
OTHER LONG-TERM LIABILITIES
($000s)
June 30, 2015

 
December 31, 2014

 
Lease inducement (1)
48,905

 
43,784

 
Long-term compensation liability (2)
2,267

 
2,271

 
Other long-term liability (3)
6,793

 
-

 
Other long-term liabilities
57,965

 
46,055

 
(1)
The Company's lease inducement is associated with the building lease for Crescent Point's corporate office. This non-cash liability will be amortized on a straight-line basis over the term of the lease to June 2030.
(2)
Long-term compensation liability relates to the Deferred Share Unit ("DSU") Plan. See additional information in Note 20 - "Share-based Compensation".
(3)
Other long-term liability consists of a liability related to the estimated unrecoverable portion of a building lease acquired through capital acquisitions. See additional information in Note 7 - "Capital Acquisitions and Dispositions".

CRESCENT POINT ENERGY CORP.
11

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 2.25 percent and an inflation rate of 2 percent (December 31, 2014 - approximately 2.25 percent and 2 percent, respectively).
The following table reconciles the decommissioning liability:
($000s)
June 30, 2015

 
December 31, 2014

 
Decommissioning liability, beginning of period
1,023,358

 
629,538

 
Liabilities incurred
25,516

 
41,892

 
Liabilities acquired through capital acquisitions
76,357

 
94,775

 
Liabilities disposed through capital dispositions
(113
)
 
(226
)
 
Liabilities settled
(7,408
)
 
(38,043
)
 
Revaluation of acquired decommissioning liabilities (1)
104,357

 
80,625

 
Change in estimated future costs
-

 
70,626

 
Change in discount rate
(11,021
)
 
122,984

 
Accretion expense
11,180

 
21,187

 
Decommissioning liability, end of period
1,222,226

 
1,023,358

 
Expected to be incurred within one year
32,852

 
52,280

 
Expected to be incurred beyond one year
1,189,374

 
971,078

 
(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, 2015
 
 
December 31, 2014
 
 


Number of
shares

 
Amount
($000s)

 
Number of
shares

 
Amount
($000s)

 
Common shares, beginning of period
446,510,210

 
14,373,418

 
394,993,566

 
12,181,396

 
Issued for cash
23,160,000

 
660,060

 
18,435,000

 
800,079

 
Issued on capital acquisitions
18,265,078

 
468,730

 
22,054,895

 
974,164

 
Issued on redemption of restricted shares (1)
1,375,723

 
51,409

 
1,887,180

 
77,896

 
Issued pursuant to DRIP (2) and SDP (3)
6,766,251

 
194,435

 
9,139,569

 
339,883

 
Common shares, end of period
496,077,262

 
15,748,052

 
446,510,210

 
14,373,418

 
Cumulative share issue costs, net of tax
-

 
(235,594
)
 
-

 
(215,899
)
 
Total shareholders’ capital, end of period
496,077,262

 
15,512,458

 
446,510,210

 
14,157,519

 
(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, 2015, the Company recorded dividends payable of $115.9 million which was settled on July 15, 2015 with cash of $79.3 million and 1,466,198 Crescent Point common shares issued pursuant to the DRIP and SDP.  At December 31, 2014, the Company recorded dividends payable of $102.7 million which was settled on January 15, 2015 with cash of $72.9 million and 1,181,265 Crescent Point common shares issued pursuant to the DRIP and SDP.
14.
DEFICIT
($000s)
June 30, 2015

 
December 31, 2014

 
Accumulated earnings
1,276,731

 
1,563,243

 
Accumulated gain on shares issued pursuant to DRIP (1) and SDP (2)
1,989

 
-

 
Accumulated tax effect on redemption of restricted shares
9,860

 
9,854

 
Accumulated dividends
(6,578,063
)
 
(5,930,150
)
 
Deficit
(5,289,483
)
 
(4,357,053
)
 
(1)
Premium Dividend TM and Dividend Reinvestment Plan.
(2)
Share Dividend Plan.

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, 2015

 
December 31, 2014

 
Long-term debt
3,985,084

 
2,943,074

 
Working capital deficiency (1)
276,567

 
433,081

 
Unrealized foreign exchange on translation of US dollar senior guaranteed notes
(284,745
)
 
(185,046
)
 
Net debt
3,976,906

 
3,191,109

 
Shareholders’ equity
10,702,518

 
10,160,889

 
Total capitalization
14,679,424

 
13,351,998

 
(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, pay 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. Net debt to funds flow from operations is used to measure the Company's overall debt position and to measure the strength of the Company's balance sheet. Crescent Point's objective is to manage this metric to be well positioned to pay monthly dividends and to continue to exploit and develop its resource plays. 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, 2015 was 1.9 times (December 31, 2014 - 1.3 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 fund its capital expenditures and 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, 2015.
16.
DERIVATIVE LOSSES
 
Three months ended June 30
 
 
 Six months ended June 30
 
 
($000s)
2015

 
2014

 
2015

 
2014

 
Realized gains (losses)
112,903

 
(72,555
)
 
279,260

 
(129,034
)
 
Unrealized losses
(359,155
)
 
(81,597
)
 
(312,539
)
 
(217,781
)
 
Derivative losses
(246,252
)
 
(154,152
)
 
(33,279
)
 
(346,815
)
 
17.
OTHER INCOME (LOSS)
 
Three months ended June 30
 
 
 Six months ended June 30
 
 
($000s)
2015

 
2014

 
2015

 
2014

 
Unrealized gain (loss) on long-term investments
(13,160
)
 
5,277

 
10,537

 
8,895

 
Gain on capital acquisitions
6,259

 
-

 
6,259

 
-

 
Gain on sale of long-term investments
740

 
-

 
740

 
-

 
Other loss
(25
)
 
-

 
(25
)
 
-

 
Other income (loss)
(6,186
)
 
5,277

 
17,511

 
8,895

 


CRESCENT POINT ENERGY CORP.
13

18.
FOREIGN EXCHANGE GAIN (LOSS)
 
Three months ended June 30
 
 
Six months ended June 30
 
 
($000s)
2015

 
2014

 
2015

 
2014

 
Realized
 
 
 
 
 
 
 
 
Foreign exchange gain (loss) on cross currency interest rate swaps - interest payment
1,283

 
(1,251
)
 
2,410

 
(1,186
)
 
Foreign exchange gain on cross currency interest rate swaps - principal repayment
-

 
-

 
8,618

 
-

 
Foreign exchange loss on settlement of US dollar senior guaranteed notes
-

 
-

 
(8,618
)
 
-

 
Other foreign exchange gain (loss)
544

 
(462
)
 
464

 
(307
)
 
Unrealized
 
 
 
 
 
 
 
 
Foreign exchange gain (loss) on translation of US dollar senior guaranteed notes
31,001

 
38,947

 
(99,699
)
 
(1,994
)
 
Other foreign exchange gain (loss)
(110
)
 
165

 
(1,126
)
 
(229
)
 
Foreign exchange gain (loss)
32,718

 
37,399

 
(97,951
)
 
(3,716
)
 
19.
INCOME TAXES
In early 2014, the Company received a proposal letter from the Canada Revenue Agency (“CRA”) in 2014 disallowing $122.8 million of tax pools and $12.6 million of investment tax credits with respect to the 2008 taxation year. The Company made representations to the CRA on the matter, with a view that the risk of losing these tax attributes was remote. However, the CRA has informed management that a notice of reassessment will be issued to that respect. The Company also received a notice of reassessment disallowing $30.1 million of tax pools in respect to the 2010 tax year. The Company is disputing both matters and management believes that it will be successful in defending its positions. Therefore, no provision for the potential income tax liability was recorded at June 30, 2015.
On June 29, 2015, the Alberta government enacted a two percent increase in the corporate income tax rate. The rate increase is effective July 1, 2015. As a result, the Company’s deferred income tax liability increased by $43.7 million in the period ended June 30, 2015.
20.
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.
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, 2015:
 
Restricted Shares

 
Deferred Share Units

 
Balance, beginning of period
3,648,565

 
84,396

 
Granted
2,341,175

 
4,069

 
Redeemed
(1,411,486
)
 
-

 
Forfeited
(88,293
)
 
-

 
Balance, end of period
4,489,961

 
88,465

 
For the six months ended June 30, 2015, the Company calculated total share-based compensation, net of estimated forfeitures and forfeiture true-ups, of $45.9 million (June 30, 2014 - $67.9 million), of which $10.4 million was capitalized (June 30, 2014 - $14.3 million).

CRESCENT POINT ENERGY CORP.
14

21.
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
 
 
 
2015

 
2014

 
2015

 
2014

 
Weighted average shares – basic
456,945,855

 
407,544,211

 
452,992,652

 
402,205,762

 
Dilutive impact of restricted shares
2,420,371

 
2,506,849

 
1,907,561

 
2,556,678

 
Weighted average shares – diluted
459,366,226

 
410,051,060

 
454,900,213

 
404,762,440

 
22.
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.
•
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 facilities bears interest at floating rates and credit spreads within the facilities are indicative of market rates. These financial instruments are classified as financial assets and liabilities at amortized cost and are reported at amortized cost.

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 June 30, 2015:
 
June 30, 2015 Carrying Value

 
June 30, 2015 Fair Value

 
Quoted prices in active markets for identical assets
(Level 1)

 
Significant other observable inputs
(Level 2)

 
Significant unobservable inputs
 (Level 3)

 
($000s)
 
 
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Derivatives
510,957

 
510,957

 
-

 
510,957

 
-

 
Long-term investments (1)
61,676

 
61,676

 
25,691

 
10,985

 
25,000

 
 
572,633

 
572,633

 
25,691

 
521,942

 
25,000

 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives
23,120

 
23,120

 
-

 
23,120

 
-

 
Senior guaranteed notes (2)
2,074,961

 
2,090,661

 
-

 
2,090,661

 
-

 
Credit note debt acquired through capital acquisitions (3)
298,608

 
298,608

 
-

 
298,608

 
-

 
 
2,396,689

 
2,412,389

 
-

 
2,412,389

 
-

 
(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.
(3)
Credit note debt acquired through capital acquisitions was settled on July 8, 2015.
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, 2014:
 
December 31, 2014 Carrying Value

 
December 31, 2014 Fair Value

 
Quoted prices in active markets for identical assets (Level 1)

 
Significant other observable inputs
(Level 2)

 
Significant unobservable inputs
(Level 3)

 
($000s)
 
 
 
Financial assets
 
 
 
 
 
 
 
 
 
 
Derivatives
803,980

 
803,980

 
-

 
803,980

 
-

 
Long-term investments (1)
49,878

 
49,878

 
21,024

 
-

 
28,854

 
 
853,858

 
853,858

 
21,024

 
803,980

 
28,854

 
Financial liabilities
 
 
 
 
 
 
 
 
 
 
Derivatives
3,604

 
3,604

 
-

 
3,604

 
-

 
Senior guaranteed notes (2)
1,682,009

 
1,795,213

 
-

 
1,795,213

 
-

 
 
1,685,613

 
1,798,817

 
-

 
1,798,817

 
-

 
(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.
16

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, 2015 and the change in fair value for the six months ended June 30, 2015:
($000s)
Commodity contracts (1)

 
Interest contracts

 
CCIRS contracts (2)

 
 
Total

 
Derivative assets / (liabilities), beginning of period
639,618

 
(2,255
)
 
163,013

 
 
800,376

 
Unrealized change in fair value
(390,917
)
 
1,924

 
76,454

 
 
(312,539
)
 
Derivative assets / (liabilities), end of period
248,701

 
(331
)
 
239,467

 
 
487,837

 
 
 
 
 
 
 
 
 
 
 
Derivative assets, end of period
257,511

 
-

 
253,446

 
 
510,957

 
Derivative liabilities, end of period
(8,810
)
 
(331
)
 
(13,979
)
 
 
(23,120
)
 
(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, 2014 and the change in fair value for the year ended December 31, 2014:
($000s)
Commodity contracts (1)

 
Interest contracts

 
CCIRS contracts (2)

 
Total

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

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

 
-

 
(6,445
)
 
Unrealized change in fair value
757,631

 
4,281

 
118,919

 
880,831

 
Derivative assets / (liabilities), end of year
639,618

 
(2,255
)
 
163,013

 
800,376

 
 
 
 
 
 
 
 
 
 
Derivative assets, end of year
640,027

 
-

 
163,953

 
803,980

 
Derivative liabilities, end of year
(409
)
 
(2,255
)
 
(940
)
 
(3,604
)
 
(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 Company's financial derivatives by contract that are offset on the balance sheet as at June 30, 2015 and December 31, 2014:
 
June 30, 2015
 
 
December 31, 2014
 
 
($000s)
Asset

 
Liability

 
Net

 
Asset

 
Liability

 
Net

 
Gross amount
518,462

 
(30,625
)
 
487,837

 
804,069

 
(3,693
)
 
800,376

 
Amount offset
(7,505
)
 
7,505

 
-

 
(89
)
 
89

 
-

 
Net amount
510,957

 
(23,120
)
 
487,837

 
803,980

 
(3,604
)
 
800,376

 
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.

CRESCENT POINT ENERGY CORP.
17

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, 2015, Crescent Point had committed, on a term contract basis, to deliver an average of approximately 11,000 bbl/d of crude oil from July 2015 to December 2015 and 2,500 bbl/d of crude oil from January 2016 to December 2019.
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, 2015 and June 30, 2014 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 a 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, 2015
 
 
Three and six months ended June 30, 2014
 
 
 
Increase 10%

 
Decrease 10%

 
Increase 10%

 
Decrease 10%

 
Commodity price
 
 
 
 
 
 
 
 
Crude oil
(264,073
)
 
264,778

 
(340,308
)
 
326,781

 
Natural gas
(6,717
)
 
6,717

 
(9,750
)
 
9,750

 
Power
314

 
(314
)
 
190

 
(190
)
 
Differential
 
 
 
 
 
 
 
 
Crude oil
-

 
-

 
435

 
(435
)
 
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, 2015, a one percent increase or decrease in the interest rate on floating rate debt would have amounted to a $2.2 million and $4.4 million, respectively impact on income before tax.
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, 2015 and June 30, 2014 with all other variables held constant:
 
Impact on Income Before Tax
 
Impact on Income Before Tax
 
 
($000s)
Three and six months ended June 30, 2015
 
Three and six months ended June 30, 2014
 
 
Forward interest rates
Increase 10%
 
Decrease 10%
 
Increase 10%

 
Decrease 10%

 
Interest rate swaps (1)
-
 
-
 
201

 
(201
)
 
(1)
The impact on income before tax for the three and six months ended June 30, 2015 was nominal.
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$1.48 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 $1.56 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.

CRESCENT POINT ENERGY CORP.
18

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, 2015 and June 30, 2014 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, 2015
 
 
Three and six months ended June 30, 2014
 
 
Cdn$ relative to US$
 
Increase 10%

 
Decrease 10%

 
Increase 10%

 
Decrease 10%

 
US dollar swaps
Forward
-

 
-

 
(3,828
)
 
3,828

 
US dollar senior guaranteed notes
Period End
187,796

 
(187,796
)
 
138,041

 
(138,041
)
 
Cross currency interest rate swaps
Forward
(207,911
)
 
207,911

 
(152,013
)
 
152,013

 
Cross currency principal swaps
Forward
(3,646
)
 
3,646

 
(3,225
)
 
3,225

 
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.
Approximately 2 percent of the Company's accounts receivable balance at June 30, 2015 is outstanding for more than 90 days and the Company considers the entire balance to be collectible.
Liquidity Risk
The timing of undiscounted cash outflows relating to the financial liabilities outstanding at June 30, 2015 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
671,016

 
-

 
-

 
-

 
671,016

 
Dividends payable
115,927

 
-

 
-

 
-

 
115,927

 
Derivative liabilities (1)
409

 
9,348

 
441

 
-

 
10,198

 
Senior guaranteed notes (2)
132,328

 
274,640

 
375,491

 
1,564,044

 
2,346,503

 
Bank credit facilities (3)
32,328

 
990,569

 
-

 
-

 
1,022,897

 
Long-term debt acquired through capital acquisitions (4)
983,719

 
-

 
-

 
-

 
983,719

 
(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 include interest based on debt outstanding and interest rates effective as at June 30, 2015.
(4)
Long-term debt acquired through capital acquisitions was settled on July 2, 2015 and July 8, 2015.
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's objective is to manage net debt to funds flow from operations to be well positioned to pay monthly dividends and to continue to exploit and develop its resource plays.
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, 2015, the Company had available unused borrowing capacity on bank credit facilities of approximately $2.65 billion, including $13.7 million letters of credit drawn on the facility. Crescent Point believes it has sufficient funding to meet its foreseeable spending requirements.

CRESCENT POINT ENERGY CORP.
19

Included in the Company's bank credit facilities balance of $926.4 million at June 30, 2015 (December 31, 2014 - $1.3 billion) are obligations of $685.0 million (December 31, 2014 - $1.2 billion) of bankers' acceptances and obligations of $246.8 million (December 31, 2014 - $90.8 million) for borrowings under the operating and syndicated prime loans, partially offset by prepaid credit facility renewal fees of $4.6 million (December 31, 2014 - $2.6 million) and prepaid interest on bankers' acceptances of $0.8 million (December 31, 2014 - $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, 2015:
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)

 
2015 July - December (2)
66,828

 
87.60

 
96.27

 
87.37

 
2016 (3)
43,249

 
83.01

 
-

 
-

 
2017 (4)
13,727

 
80.62

 
-

 
-

 
2018 January - September
8,310

 
79.71

 
-

 
-

 
(1)
The volumes and prices reported are the weighted average volumes and prices for the period.
(2)
Includes 500 bbls/d which can be extended at the option of the counterparty for calendar 2016 at an average swap price of $95.00/bbl.
(3)
Includes 2,500 bbls/d which can be extended at the option of the counterparty for calendar 2017 at an average swap price of $90.39/bbl.
(4)
Includes 4,000 bbls/d which can be extended at the option of the counterparty for the first half of 2018 at an average swap price of $86.16/bbl.
Financial AECO Natural Gas Derivative Contracts – Canadian Dollar (1)
Average Volume
(GJ/d)
 
Average Swap Price
($/GJ)
 
Term
 
2015 July - December
34,000
 
3.60
 
2016
32,005
 
3.57
 
2017
16,425
 
3.55
 
2018 January - March
11,000
 
3.55
 
(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
 
2015 July - December
Swap
3.0
 
49.50
 
2016
Swap
3.0
 
50.00
 
2017
Swap
3.0
 
52.50
 
Financial Interest Rate Derivative Contracts – Canadian Dollar
 
Notional Principal
($)
 
Fixed Annual
Rate (%)
 
Term
Contract
 
 
July 2015
Swap
50,000,000
 
3.63
 

CRESCENT POINT ENERGY CORP.
20

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 2015 – April 2016
Swap
52,000,000

 
3.93

 
50,128,000

 
4.84

 
July 2015 – March 2017
Swap
67,500,000

 
5.48

 
68,917,500

 
5.89

 
July 2015 – April 2018
Swap
31,000,000

 
4.58

 
29,884,000

 
5.32

 
July 2015 – June 2018
Swap
20,000,000

 
2.65

 
20,350,000

 
3.52

 
July 2015 – May 2019
Swap
68,000,000

 
3.39

 
66,742,000

 
4.53

 
July 2015 – March 2020
Swap
155,000,000

 
6.03

 
158,255,000

 
6.45

 
July 2015 – April 2021
Swap
82,000,000

 
5.13

 
79,048,000

 
5.83

 
July 2015 – June 2021
Swap
52,500,000

 
3.29

 
56,348,250

 
3.59

 
July 2015 – May 2022
Swap
170,000,000

 
4.00

 
166,855,000

 
5.03

 
July 2015 – June 2023
Swap
270,000,000

 
3.78

 
274,725,000

 
4.32

 
July 2015 – June 2024
Swap
257,500,000

 
3.75

 
276,374,750

 
4.03

 
July 2015 – April 2025
Swap
230,000,000

 
4.08

 
291,065,000

 
4.13

 
July 2015 – April 2027
Swap
20,000,000

 
4.18

 
25,310,000

 
4.25

 
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$1.48 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 $1.56 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.
23.
RELATED PARTY TRANSACTIONS
All related party transactions are recorded at the exchange amount.
During the three and six months ended June 30, 2015, Crescent Point recorded $0.3 million and $0.9 million, respectively, (June 30, 2014 - $0.2 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 $0.6 million and $0.7 million during the three and six months, respectively, ended June 30, 2015 (June 30, 2014 - $0.1 million and $0.1 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.

CRESCENT POINT ENERGY CORP.
21

24.
SUPPLEMENTAL DISCLOSURES
Cash Flow Statement Presentation
 
Three months ended June 30
 
 
Six months ended June 30
 
 
($000s)
2015

 
2014

 
2015

 
2014

 
Operating activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Accounts receivable
43,335

 
18,040

 
81,360

 
(45,967
)
 
Prepaids and deposits
3,514

 
2,642

 
(1,200
)
 
(4,131
)
 
Accounts payable and accrued liabilities
(67,892
)
 
(11,348
)
 
(130,381
)
 
61,776

 
Other long-term liabilities
(345
)
 
14,293

 
(92
)
 
19,439

 
 
(21,388
)
 
23,627

 
(50,313
)
 
31,117

 
Investing activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Accounts receivable
11,509

 
(1,033
)
 
18,151

 
(2,401
)
 
Accounts payable and accrued liabilities
(21,057
)
 
(152,717
)
 
(128,972
)
 
(165,694
)
 
 
(9,548
)
 
(153,750
)
 
(110,821
)
 
(168,095
)
 
Financing activities
 
 
 
 
 
 
 
 
Changes in non-cash working capital:
 
 
 
 
 
 
 
 
Dividends payable
10,612

 
5,219

 
13,230

 
5,932

 
25.
GEOGRAPHICAL DISCLOSURE
As at June 30, 2015, Crescent Point's non-current assets related to the U.S. foreign operations is $2.0 billion (December 31, 2014 - $1.8 billion). For the three and six months ended June 30, 2015, Crescent Point's oil and gas revenue related to the U.S. foreign operations is $82.5 million and $140.6 million, respectively (June 30, 2014 - $93.4 million and $179.2 million, respectively).
26.
SUBSEQUENT EVENTS
Arrangement Agreement with Coral Hill Energy Ltd.
On July 2, 2015, Crescent Point announced that it entered into an agreement, by way of plan of arrangement, to acquire all of the remaining issued and outstanding shares of Coral Hill Energy Ltd. ("Coral Hill"), a private oil and gas producer with properties in west central Alberta. Total consideration is estimated to be approximately $258 million, including the Coral Hill shares already owned by Crescent Point, and will include a combination of Crescent Point shares and assumed debt. The arrangement with Coral Hill is expected to close on or about August 14, 2015.
Settlement of Long-term Debt acquired through Capital Acquisitions
On July 2, 2015 and July 8, 2015, Crescent Point settled the $685.1 million drawn on the bank facility and the US$239.4 million credit note debt from the Legacy acquisition, respectively.
Base Shelf Prospectus
On July 20, 2015, Crescent Point filed a short form base shelf prospectus (the “Prospectus”) with the securities regulatory authorities in each of the provinces of Canada, and a corresponding registration statement with the United States Securities and Exchange Commission under the Multijurisdictional Disclosure System. The Prospectus will allow Crescent Point to offer and issue common shares, subscription receipts, warrants, options and debt securities by way of one or more Prospectus Supplements at any time during the 25-month period that the Prospectus remains in place up to an aggregate offering amount of $2.5 billion. The securities may be issued from time to time, at the discretion of Crescent Point, and the ability to issue securities will be subject to market conditions at the time any securities are offered.

CRESCENT POINT ENERGY CORP.
22

Directors
Peter Bannister, Chairman (1) (3)
Rene Amirault (2) (4)
Laura Cillis (1)
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 2000, 585 - 8th Avenue S.W.
Calgary, Alberta T2P 1G1
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:
Computershare Trust Company of Canada
600, 530 - 8th Avenue S.W.
Calgary, Alberta T2P 3S8
Tel: (403) 267-6800
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