Opinions
Brian Madden
Crescent Point Energy Corp
CPG-T
DON'T BUY
Oct 18, 2017
Stock price when the opinion was issued
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Recent M&A not being rewarded by market. Investors would rather return of capital, rather than buying new assets. Out of favor stock. OVerall, demand for energy rising. Strong business with good management team. Current share price very cheap. Good for long term investors who are patient. Generating strong cash flow, with ability to pay down debt.
Very misunderstood and still perceived as management drilling 100 barrel per day wells in SE Saskatchewan. Rather, a lot has changed, repositioned into the Duvernay and Montney regions with two decades of high-quality inventory now, drilling some of the best wells ever. They will return 60% of their free cash flow to investors and are actively buying back shares. Are paying down debt more next year. He targets $19.28. Lots of upside.
(Analysts’ price target is $13.46)The CPG today is not the CPG of old. It used to have a lot of low-grade wells and bought a lot of companies. Now, they have a serious drilling inventory in the Montney and Duvernay, economic ones in the latter. The board is now conservative and respected. they have more than enough . He projects 3.5x free cash flow inventory, 60% returns to shareholders and the rest to the bank to pay off purchases. In a year or so, that ratio should be 80/20. Meanwhile, are buying back shares and continue drilling profitable wells. He targets around $20. It ticks all the boxes.
(Analysts’ price target is $14.63)
One of the larger E&P companies in the sector. He has not been that keen on the sector as of late. The problem is a lack of pipeline capacity to get the product out. Western Canadian Crude is trading at a decent discount. Profitability is not where he would like to see it with most of these Canadian companies. You want to go best of breed. You want to own downstream assets. He prefers SU-T because of great upstream assets as well as refineries and service stations.