Crescent Point Energy Corp (CPG.TO) Buy, Sell…

Crescent Point Energy Corp (CPG.TO)

11.72

-0.04 (0.34%)

as of May 14, 2024, 8:00:00 pm Market Open.

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DON'T BUY

She owns no energy producers. CPG has benefited the past year from rising oil prices. But over five years, you're down double digits. This year, it'll depend on oil prices. If you think oil prices will go a lot higher, so will CPG, but she can't forecast oil. Though, she doesn't see a huge rise.

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COMMENT

Believes company and energy sector getting a nice lift with energy prices rising. Good assets with attractive valuation, if energy prices stay at current level, or go lower. However, does not own stock. Better opportunities in Kelt Exploration, Nuvista Energy and Headwater Exploration.

HOLD

Recent large dividend increase. Lots of free cash. Astute management in turning the company around. Reasonable multiple. A longer term hold. Capex program is steady. Expects dividend increases over the years, and perhaps some buybacks.

BUY

Has been a terrible performer. Trading at an unbelievable discount. Trading at 2.5x cashflow at $70. They could pay a 12% return next year. Downside is limited and upside is meaningful. Deep value.

TOP PICK

Oil stocks are still cheap. Trades at 3 and a bit operating cashflow. Free cashflow generation is incredible right now. A good hold for the next year or two. More upside. Yield is 2.18%. (Analysts’ price target is $9.03)

COMMENT

There was an overhang from Shell. The real hindrance is that management does not get the necessity of meaningful return of capital. The stock is inexpensive, trading at 2.3x at $70, 1.9x at $80. Free cashflow is 24% at $70 and 35 at $80. Need to be more convinced they will be more aggressive with ROC.

COMMENT

If you keep oil and gas at these price levels for a couple quarters, they would all trade at silly levels. They are cheap. Could continue to own if you believe in oil. Likes Whitecap, Enerplus, Arc, and Advantage more. Tourmaline is another option.

TOP PICK

Likes the energy group. He wants the cheapest stock that's giving him a technical buy signal. Excellent balance sheet. Very strong upside potential. Recent purchase was brilliant. Yield is 1.99%. (Analysts’ price target is $8.88)

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WATCH

He doesn't own oil. CPG has been in the penalty box for a while over concerns of leverage and the management team. Whitecap and Tamarack, for example, have stronger managers and growth profiles. However, more recently CPG has progressed by selling weaker asseets. CPG trades at a discount to those peers. Some investors recently see this as a value play in energy. Keep an eye on this and do some homework.

COMMENT

Likes assets, but not the setup for that size of company. How will they attract capital? Ability to do M&A is hampered. Two choices: higher dividend yield with lower growth, or consolidate with someone else. If oil goes higher, stock could take off. If not, it will be a parked car until a catalyst.

DON'T BUY

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).

TOP PICK

Down almost 20% this summer without any news. Management and board should be aggressive with their free cashflow. Paying down debt in the Duvernay purchase. Trading at 26% free cashflow yield. Would generate about $1B of free cashflow. A 10% share buy back would be effective. Balance sheet will be back in shape. (Analysts’ price target is $7.82)

DON'T BUY

He had left the intermediate producers behind. It is between investor bases. There is not a basis beyond a pop in the commodity price. He sticks to those that did a better job at maintaining their dividend.

BUY ON WEAKNESS

Has pulled back. An opportunity to buy into it. Bought an asset from Shell. The Duvernay play gives them new wind. A higher cost play but worth it at $60 oil. Paid an attractive price for the acquisition. Trade at 3.3x cashflow, and could trade up to 5x cashflow. 80-90% upside. Sold it in the high $5 low $6.

SELL ON STRENGTH

A value trap that tumbled from $40 to $20 to lower over the years. Fortunately, it's now seeing a bit of a turnaround. However, the world is pushing away from oil and towards green energy. That said, CPG could continue to move up, though not back up to its heyday. He would pass, but he expects CPG to rise as the oil price does. He doesn't own any energy now.

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Crescent Point Energy Corp (CPG.TO)