Crescent Energy is a Top Pick for natural gas - Dec 30

[dan_s]

Crescent Energy (CRGY) is one of my Top Picks for those of you who want more exposure to rising natural gas prices. Why?

1. Production Mix: 43.5% natural gas, 17.5% NGLs and 39.0% crude oil.

2. Location: Most of the Company's production is from the South Texas Eagle Ford / Austin Chalk which has plenty of pipeline access AND direct access to several large LNG export facilities including Cheniere Energy's big facility at Corpus Christi, Texas.

3. Hedges: Most of its natural gas hedges in 2025 are collars with $3.12 floors and $5.74 ceilings. Only 22% of their 2025 NGas is hedged with Swaps at $3.95. < Even if U.S. natural gas averages just $3.00 in 2025, this company will be very profitable and should generate over $2.00 net income per share next year.

4. Flexibility: They have the ability to shift their drilling program to areas that are more prone to natural gas.

The Company is going to be very profitable in 2025:
> My forecast: Revenues of $4,006 million, Net Income of $465 million ($2.44/share), Operating Cash Flow of $1,904 million ($7.24/share), and free cash flow should be close to $1 billion.
> TipRanks' consensus forecasts: Revenue of $3,728 million, Net Income per share of $1.92 and Operating Cash Flow per share of $7.03.

My current valuation is $25.00 per share.

The merger of SilverBow Resources into Crescent Energy closed on July 30, 2024. Q4 2024 will be the first full quarter of combined results. As the Wall Street Gang gains more confidence in the Company more analysts will cover it, and they will increase their price targets.

[dan_s]

PS: Take the time to download the Excel version of my forecast model for Crescent Energy and learn how to do use it for your own analysis.

My forecast model are macro driven Excel spreadsheets. You just need to change the production volumes and commodity prices in the forecast periods and the model will update automatically, showing you net income per share, cash flow per share and the adjusted stock valuation base on the different production volumes and commodity prices.

Tools are only valuable if you learn how to use them.

[knusser58]

Hi Dan,
can you please check and confirm the amount of shares outstanding (A and B, basic and diluted) for CRGY.
I noticed a difference between your model and Q3 2024 Results presented by the company.
Thank you and Regards,
Klaus

[dan_s]

From the Company's 9/30/2024 10Q

A Shares outstanding = 162,391,343
B Shares outstanding = 65,948,124

For my 2025 forecast I am using 191,000,000 A shares outstanding because payment for the Ridgemar Energy Acquisition that is expected to close in Q1 2025 includes 28.6 million shares.

My valuation of CRGY is based on Adjusted Operating Cash Flow per share base on A+B shares.

Note that my $25/share valuation is based on just 3.5 X annualized operating CFPS (A+B), which I believe is a very conservative valuation.

Timing is good on this one because they are going to report significant production increases in Q4, Q1 and Q2.

[knusser58]

Hi Dan,
thank you for your reply.
Regards

[dan_s]

That's why you pay Big Bucks for your EPG membership.
I appreciate your support.

FYI Harry will be joining me on our January 16th webinar. Several high-quality Canadian gassers are in his Top Picks for 2025.

Register on the EPG website if you want to attend the live webinar. We will be taking questions.