Crescent Point (CPG) Valuation Update - Nov 23

[dan_s]

Yes, I am working on Thanksgiving! Thanks to my vacation last week, I have a lot "To Do List".

I have finally updated my forecast/valuation for CPG for their significant acquisition of Hammerhead that is expected to close mid-December.
CPG's Proforma Guidance for 2024 is:
> Production of 200 to 208 MBoepd (65% liquids) < Up from ~159,000 Boepd in Q4 2023.
> CapEX in 2024 of $1.45 to $1.55 Cdn Billion.
> Free Cash Flow in 2024 now expected to be $1.0 to $1.2 Cdn Billion

CPG.TO closed at $9.56Cdn on November 22nd.
Four 5-Star Energy Sector analysts have submitted updated price targets to TipRanks that have been adjusted for the acquisition.
> All four of them rate the stock a BUY with price targets that range from $13.00 to $19.00 Cdn.

My valuation goes down slightly to $16.75Cdn or $12.30US per share, primarily because CPG did not give details on the liquids production, so I put most of it in the Heavy Oil category, which sells at a discount to Light Oil.

Size Matters in this business. This deal will make CPG the 7th largest upstream oil & gas producer in Canada.
It is a very profitable company with a lot of high-quality "Running Room".
It pays a decent dividend (~4.8% yield) and it is funding a stock buyback.

It does take time for the Wall Street Gang to fully grasp the potential of deals this large. Q1 2024 will be the first full quarter of combined results.

[knusser58]

Hi Dan,
in the latest company presentation the 2024 forecasted cashflow from operations is +/- 2.6MMMcad$.
This about 500MMcad$ higher than your forecast.
Can you help me understand the difference?
Thank you and regards,
Klaus

[dan_s]

Because they did not give a split on their liquids production next year, I put most of it in the Heavy Oil category, which has a lower price. Plus, I have a $200 "cushion" in my operating cash flow forecast. Until I get more detailed guidance for next year, I want to err on the side of caution.

Now that I look at their actual Adjusted Operating Cash Flow for Q3 of $676Cdn million, my 2024 does look too conservative. My LOE forecast for 2024 is also VERY CONSERVATIVE (probably too high).

CPG is a recent addition to the Sweet 16, so safer for me to be conservative in my model assumptions until I get a better "feel" for the forecast.

[knusser58]

Thank Dan,
all clear.
Regards,
Klaus