Crescent Energy (CRGY) Valuation Update - May 23

[dan_s]

Crescent Point is being added to our Sweet 16 Growth Portfolio.
It replaces Talos Energy (TALO). I'm just moving TALO back to my Watchlist until after hurricane season.

I spent most of the day yesterday building my valuation model for Crescent Point. It has been posted to the EPG website.

My model is based on the assumption that SilverBow Resources (SBOW) will merge into CRGY on September 30, 2024. Crescent Point has announced the closing date as "late in the 3rd quarter". For a stock valuation it really doesn't matter when a stock-for-stock merger closes since SilverBow does not pay dividends.

My current valuation of CRGY is $22.00/share. < 4X 2024+2025 operating cash flow annualized; I double weight CFPS for 2024.

CRGY closed yesterday at $12.18.

Three of the Wall Street Gang have updated their price targets since the merger was announced on May 16th.
5/17/2024: Raymond James' PT is now $17.00
5/17/2024: Mizuho Securities' PT is now $17.00
5/23/2024: Truist Financial's PT is now $20.00 < Neal Dingmann is a 5-Star energy sector analyst that is highly respected by the "Gang".

TipRanks' current forecast for 2025: $2.36 Net Income Per Share with $7.77 operating cash flow per share. < It still includes three forecasts that are dated before May 16, so they are based on Crescent Energy being a standalone company.

Post-Closing Proforma production in Q4 2024 (based on my forecast) should be approximately 254,000 Boepd (37.5% oil, 18.5% NGLs and 44.0% natural gas).

My forecast for 2025 is based on the assumption that Crescent Energy will run five operated rigs, ramping up production to 265,000 Boepd. For 2025 my production mix is 37.5% oil, 18.5% NGLs and 44.0% crude oil.

Raymond James' forecast assumes production of 247,300 Boepd for 2025, which seems overly conservative to me. For Q1 2024 the combined production of CRGY and SBOW was 257,163 Boepd (36.9% oil, 17.7% NGLs and 45.4% natural gas). During 2024 both companies' drilling programs are focused on oil prone areas.

Bottomline: SilverBow shareholders will receive 3.125 shares of CRGY for each share of SBOW they own at closing, so all three of the Wall Street Gang that have updated their price targets think it would be wise for SilverBow shareholders to hang tough and take the stock instead of the cash offered ($38) at closing. I obviously agree with that recommendation. For income tax purposes, a stock-for-stock exchange is tax free.