Crescent Point Energy Corp (CPG.TO) Buy, Sell…

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Crescent Point Energy Corp (CPG.TO)

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11.72

-0.04 (0.34%)

as of May 14, 2024, 8:00:00 pm Market Open.

1026 watching

COMMENT

If you keep oil and gas at these price levels for a couple quarters, they would all trade at silly levels. They are cheap. Could continue to own if you believe in oil. Likes Whitecap, Enerplus, Arc, and Advantage more. Tourmaline is another option.

TOP PICK

Likes the energy group. He wants the cheapest stock that's giving him a technical buy signal. Excellent balance sheet. Very strong upside potential. Recent purchase was brilliant. Yield is 1.99%. (Analysts’ price target is $8.88)

WATCH

He doesn't own oil. CPG has been in the penalty box for a while over concerns of leverage and the management team. Whitecap and Tamarack, for example, have stronger managers and growth profiles. However, more recently CPG has progressed by selling weaker asseets. CPG trades at a discount to those peers. Some investors recently see this as a value play in energy. Keep an eye on this and do some homework.

COMMENT

Likes assets, but not the setup for that size of company. How will they attract capital? Ability to do M&A is hampered. Two choices: higher dividend yield with lower growth, or consolidate with someone else. If oil goes higher, stock could take off. If not, it will be a parked car until a catalyst.

DON'T BUY

https://www.cbc.ca/news/canada/calgary/bitcoin-mining-black-rock-petroleum-company-1.6106978 The bitcoin miners won't drive Canadian energy producers. Instead, energy companies are price-takers. Bitcoin will find ways to alt energy sources of power. CPG itself is well-run, acquisitive and not afraid to make big deals. The CEO is trying to show capital discipline, but it's very hard to pay a dividend when your resources are being depleted and you're not in control of the pricing of what you sell. This is a cyclical business. Oil prices will likely move a bit higher. Keep your energy holdings limited and tight. In oil, he prefers Cenovus or Tourmaline or Topaz (for income).

TOP PICK

Down almost 20% this summer without any news. Management and board should be aggressive with their free cashflow. Paying down debt in the Duvernay purchase. Trading at 26% free cashflow yield. Would generate about $1B of free cashflow. A 10% share buy back would be effective. Balance sheet will be back in shape. (Analysts’ price target is $7.82)

DON'T BUY

He had left the intermediate producers behind. It is between investor bases. There is not a basis beyond a pop in the commodity price. He sticks to those that did a better job at maintaining their dividend.

BUY ON WEAKNESS

Has pulled back. An opportunity to buy into it. Bought an asset from Shell. The Duvernay play gives them new wind. A higher cost play but worth it at $60 oil. Paid an attractive price for the acquisition. Trade at 3.3x cashflow, and could trade up to 5x cashflow. 80-90% upside. Sold it in the high $5 low $6.

SELL ON STRENGTH

A value trap that tumbled from $40 to $20 to lower over the years. Fortunately, it's now seeing a bit of a turnaround. However, the world is pushing away from oil and towards green energy. That said, CPG could continue to move up, though not back up to its heyday. He would pass, but he expects CPG to rise as the oil price does. He doesn't own any energy now.

PAST TOP PICK

(A Top Pick Dec 10/19, Down 40%) Of course, he didn't foresee oil prices going negative (in April). CPG is not in a bad position here. North of $40/barrel, they can generate decent cash flow. It's decent.

PAST TOP PICK

(A Top Pick Dec 19/19, Down 44%) They are deleveraging and have pulled off some asset dispositions. They are doing everything the market has asked them for. It is under pressure because you need market scale to attract investors. We need to see further consolidation. You need 19-20% free cash flow yield at $60 oil.

BUY

WCP vs. CPG Both are good given strong sector rotation coming back to energy. Owns WCP for the dividend and growth potential.

WEAK BUY

He met with the new management team a year ago and it seemed they were doing the right things: cleaning up the balance sheet, getting decline rates lower by divesting some properties. The share price is starting to reflect stronger oil markets. He thinks you should go with Whitecap Resources (WCP-T) to invest in the Canadian oil sector. BP-N is another to look at.

PAST TOP PICK

(A Top Pick Dec 19/19, Down 60%) It offers meaningful cashflow. They are treading water but have meaningful leverage to an increasing oil price. At $50, it will trade at 24% free cashflow yield, at $60. 60%. It could potentially amalgamate with other companies in the area.

DON'T BUY

Still a wounded animal, though getting better. Valuation is around 7.8x. It is a levered play to oil, but you have a much better risk/reward with Arc Resources, Advantage, or Suncor. Global growth, US shale, environmental concerns are complicating factors.

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Crescent Point Energy Corp (CPG.TO)