Crescent Point Energy (CPG) Valuation Update - Mar 19

[dan_s]

Last but not least, I finally finished my review of the Crescent Point profile. It will be posted to the EPG website later today.

The Company had a "complicated" 4th quarter and Canadian companies are always harder to model.

CPG closed two acquisitions in the first half of 2023, Kaybob Duvernay in February and Spartan Montney in May, increasing production from 139,280 Boepd in Q1 to 180,581 Boepd in Q3.

Then on October 31st they sold all of their North Dakota assets (Bakken Shale), which lowered production by 23,500 Boepd and they recorded a $229.1Cdn million "Loss from Discontinued Operations" in the quarter, most of which was a non-cash item.

To complicate my forecast even more, they closed the Hammerhead Acquisition on December 21, 2023 that added about 40,000 Boepd of production, pushing total production over 200,000 Boepd. 2024 exit rate s/b 210,000 Boepd.

Plus, the Company breaks down their production mix into six categories (Light & Medium Oil, Heavy Crude, Tight Oil (ultra-light), NGLs, Shale Gas and Conventional Gas). Each category has different pricing. The Company's forecast just says total production in 2024 should be 198,000 to 206,000 Boepd with 68% liquids. They don't even split out NGLs.

So, my forecast for 2024 includes quite a bit of "guessing", until I see Q1 actual results with a full quarter of Hammerhead production.

That said my 2024 forecast is lower than the consensus forecast now on TipRanks. When I have a lower-than-normal confidence level in my forecast, I always use conservative assumptions AND I build in some cushions in case I overlook something.

Three 5-Star energy sector analysts have provided updated forecasts to TipRanks.
> The consensus is $4,274 million Cdn Revenues, $1.63Cdn Earnings per share and $3.95Cdn Operating Cash Flow per share.
> My forecast is $4,146 million Cdn Revenues, $1.49Cdn EPS and $3.31 Operating CFPS. Free cash flow based on my forecast s/b ~$600Cdn million.

My current stock valuation of $10.50Cdn is based on 4X annualized Operating CFPS for 2023 - 2025. This is a fairly low multiple for a company of this size that has a lot of high-quality "Running Room" (~3,900 Premium Development Drilling locations in 3 core areas).

Crescent Point's December 31, 2023 audited reserve report shows a PV10 Net Asset Value of $9.60Cdn just for their Proved Reserves.

At the time of this post CPG was trading for $10.76Cdn. My valuation is $14.18Cdn, which translates to $10.50US.

Current dividends are $0.115Cdn/quarter (~4.3%) and they have a stock buyback underway.