Crescent Energy (CRGY) Valuation Update - Nov 5

dan_s · Post by **dan_s** » Tue Nov 05, 2024 12:56 pm

I have updated my forecast/valuation model for CRGY and it will be posted to the EPG website this afternoon.

At the time of this post CRGY was trading at $12.91.

My valuation increases by $1.00 to $23.00 per share based on just 3.75 X annualized operating cash flow per share. Based on my forecast, which is slightly lower than TipRanks' consensus forecast, Crescent Energy is on pace to generate Adjusted Operating CFPS of $5.65 this year and $7.11 in 2025.

TipRanks: "In the last 3 months, 7 ranked analysts set 12-month price targets for CRGY. The average price target among the analysts is $16.00. Truist Financial and Wells Fargo have submitted updated price targets of $19.00."

The Company is free cash flow positive. FCF should be ~$155 million in Q4.
< The merger with SilverBow Resources closed on July 30th and an accretive bolt-on acquisition in the Central Eagle Ford play in South Texas closed October 1st adding ~4,000 Boepd of production (~85% oil).
> Q4 production guidance is ~255,000 Boepd, up from 218,650 Boepd in Q3.
> Looking ahead to 2025, my forecast is based on production of 265,000 Boepd that generates revenues of $3.8 billion and operating cash flow of $1,634 million ($7.11 per share). TipRanks' 2025 CFPS forecast is $7.12.

Crescent Energy has a lot of Running Room in their two core areas in the South Texas Eagle Ford / Austin Chalk and in the Uinta Basin in Utah.

Current production mix is 43.5% natural gas, 39.0% crude oil and 17.5% NGLs. ~86% of their Q3 revenues were from liquid sales. Their realized natural gas price in Q3 was right at $2.00/mcf including cash settlements on their hedges and regional price differentials. The have plenty of pipeline access for their gas in South Texas and direct access to Gulf Coast LNG exporters should help them get better gas prices in the future.

If WTI stays in the $70s and natural gas prices firm up to $3.00, CRGY should draw more attention. The year-end reserve report should show a PV10 Net Asset Value near $20/share.