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Opinions John O'Connell, CFA
Crescent Point Energy CorpCPG.TODON'T BUYAug 10, 2021
John O'Connell, CFAStock price when the opinion was issued
As of May 14, 2024. Market Open.
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Hammerhead was a good deal, horrific timing with oil falling overnight. Deal is 11% accretive on free cashflow per share, extended premium inventory life from 15 years to 20. He sees 75% potential upside at $80 oil. Yield is 4.21%.
He's pro-M&A, if it allows a company to pay shareholders more. CEO promised him last week that the company "is done" with M&A.
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Premium contentOur PAST TOP PICK with CPG has triggered its stop at $9.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 1%, when combined with our previous recommendations.
Never a good sign when your stock issue gets hung up. Timing wasn't ideal, with weaker sentiment on oil below $80. New concerns about acquisition binges. Special dividend was a "teaser". On the sidelines, due to short-term indigestion on the acquisition. May need dispositions to bring debt back down.
Expecting 100% upside at current share price. Transitioned from SE Saskatchewan to Montney play in BC (decades of inventory). Largest active shareholder in company. Trading under 3x cash flow given $80 oil price. New frac technique allowing for large increase of production from oil wells. Expecting ~$21 share price.
Eric NuttallPremium contentWith quarterly reported cash reserves growing, while debt is retired and stock bought back, we again reiterate CPG as a TOP PICK. The company recently announced it is selling its N. Dakota assets for $675 million and plans to spend over $1 billion in capital projects next year. We continue to recommend a stop at $9.50, looking to achieve $14 -- upside potential over 24%. Yield 3.2%
(Analysts’ price target is $14.25)
Looks really good for the small- to mid-cap energy space in Canada. At 2.4x, cheaper than peers at 3.4x. Decent dividend, some solid execution. Cashflow rising. Production growth profile of 7%. Investable. But do you want to buy now with a crowded trade and oil prices higher than they'll be in future?
Successfully transitioned into long reserve life company (Duvernay & Montney).
Largest oil wells in Canada.
Returning 60% of free cash flow yield to investors.
~15 years of high quality inventory.
Expecting 100% upside at current share price.
Dividend yield ~3% and will also issue special dividends.
Eric NuttallPremium content
https://www.cbc.ca/news/canada/calgary/bitcoin-mining-black-rock-petroleum-company-1.6106978 The bitcoin miners won't drive Canadian energy producers. Instead, energy companies are price-takers. Bitcoin will find ways to alt energy sources of power. CPG itself is well-run, acquisitive and not afraid to make big deals. The CEO is trying to show capital discipline, but it's very hard to pay a dividend when your resources are being depleted and you're not in control of the pricing of what you sell. This is a cyclical business. Oil prices will likely move a bit higher. Keep your energy holdings limited and tight. In oil, he prefers Cenovus or Tourmaline or Topaz (for income).