Crescent Point Energy Corp

CPG-T

All oil stocks have been hit in a very difficult environment, though CPG itself is well-run with good value and a decent balance sheet. Wait till after tax-loss selling season.

More than any other company, they realize the need to buyback shares. They could buyback 8% of shares based on 25% free cash flow yield. It trades at only 70% of their liquidation value, so they won't spend money on growth. Balance sheet is strong. Nothing wrong here. CPG is clealy mispriced. (Analysts’ price target is $6.80)

People consider it to be very cheap. You aren’t getting per share growth because debt pay down is their priority. You need a rally in the commodity price. They will muddle along with their peers.

This used to be his largest oil holding. Investors are worried. The whole oil complex is under pressure, but this is a good company. Canada doesn't have a pipeline, and he doesn't see that changing soon. However, if another pipeline is built, then CPG will greatly recover. He doesn't own much oil, only 3-5% in his portfolio.

Oil in two years He can't predict oil. He won't touch this, not even at $4. They've made their balance sheet worse. His model price $5.31. There are more write-offs--and pain--to come.

They have debt and when you don't know your revenue, debt is a scary thing. The question is how do you feel about oil prices. He does not think fack wells are that attractive unless you have lots of capital. It depends where you think oil prices are going in Western Canada.

CPG-T has gone through a rough spell. Despite higher oil prices, they have not recovered to the same degree. He blames their last acquisition as it forced them to cut the dividend. They are no longer the glamour stock. They have to "show me" before he gets back in. He would pursue the bigger more liquid names first.

They should be cautious before raising the dividend. There is a lot going on in the oil patch in Canada. It consolidated and then there was a downturn and it is still in a consolidation phase. May 9 is the end of the seasonal period for it so there will be more consolidation for the sector at this point. There is nothing wrong with it but he would wait on it.

The company has revamped, but the market hasn't responded. Is it a takeover target? Their payout used to be over 100% and issued more and more equity. That model is gone, and it's now much more sustainable. They have solid assets in the Prairies. When Canada changes governments and foreign capital buys Canadian energy stocks again, then CPG will definitely be a takeover target.

ATH-T is a prior top pick that he sold about a month ago to buy CPG-T (who has been buying back shares on free cash-flow). He has concerns over ATH-T liquidity in the market and he held heavy oil exposure in other bigger names. ATH-T has done well to deleverage their balance sheet.

He has been critical of them in the past, but it is a new story. The new managment team understands the opportunity when their company trades below book value. They are trading at 26% yield of free cash flow. They should hold production flat, harvest the cash and buy back shares. They have infrastructure and production to monetize and buy back shares. Yield 0.76%. (Analysts’ price target is $7.03)

He's researched this a lot. He's disappointed with all its write-offs and he's very negative about this. The market still doesn't like some things on its balance sheet. This isn't ready to return to highs yet--but he'll keep his eye on it.

Why do they have to sell assets? Debt is 65% debt to equity. Cut the dividend. Want to pay down debt by about 1B. In the doghouse right now. Leadership is a question mark, as well as what's a core asset. It's had a bounce, up about 50%. Fabulous recovery. Stocks will cool off in Q2, but will come back in Q4. Dips are windows to buy. Numbers are cheap based on cash flow, but the problem is the debt. May be of interest if it gets below $4.50.

He's owned this in the past and likes the management. He likes the changes they are making. But with a 1% dividend, you're looking at only equity growth. Now is a good entry point, but he wants to see light at the end of the energy tunnel--which he doesn't see first. He has a $7 buy on this as a speculative buy. He likes it.