CPG - Crescent Point Energy

[Cardboard]

They have just released their latest corporate presentation:

 

http://www.crescentpointenergy.com/sites/default/files/uploads/presentations/02-2018-corporate_presentation_0.pdf

 

The stock has come down significantly just like most Canadian producers (except large oil sands producers) and now trades at under $50,000 per boe/d depending on the production numbers that you are using for 2018.

 

The company is best in class with its netbacks, internal culture of developing best techniques, mostly light oil with large inventory, will continue to grow and not really affected much by this WCS severe discount that everyone now talks about: look at their locations and light oil percentage of total production.

 

IMO, this company is comparable to a CLR (250,000 boe/d vs 185,000 boe/d at CPG) but, trades at a much lower multiple. For example, CLR trades at $120,000 CAD per boe/d. Netbacks for CLR are better but, its liquid content is 58% vs 90%.

 

I believe that it will get revalued to a more reasonable multiple or will be taken out by the likes of CLR. The majors such as Exxon are also moving heavily into shale after years of neglect and this could be a solid fit for Imperial Oil (Canadian based but, controlled by Exxon). In the meantime, you get paid a sustainable 4.1% yield.

 

While it is hard to predict the price of oil, the trend seems positive. However, if you look back at the price of CPG and oil over the past 2 years, you will observe a major disconnect. Something has to give: oil price, price of U.S. peers...

 

Cardboard

[Spekulatius]

Interesting idea and this wasn’t a name I have been familiar with, unlike CVE, which has poor mangement, IMO.

 

I noticed that they tend to have large charges every year in the last quarter (reserve writerofd), are these in fact reserve write offs. It seems thwt these extraordinary write offs are nit thwt extraordinary and skew the numbers a bit. I have not spent much time on this stock, but would like to get involved in E&P’s again and CPG seems like a decent candidate to get exposure.

[Cardboard]

Help is coming:

 

https://www.morningstar.com/news/business-wire/BWIPREM_20180409005620/cation-capital-releases-letter-to-the-board-of-directors-of-crescent-point-energy-and-announces-intention-to-nominate-four-highlyqualified-independent-directors-for-election-to-the-crescent-point-energy-board.html

 

Great assets, very low price but, corporate governance needs to be addressed. Delivering value for shareholders is absent from their language/culture.

 

A rising oil price obviously lifts every boat but, there is much much more that can be achieved if proper targets are put in place.

 

Cardboard

[Cardboard]

The company has pretty much followed every suggestion made by Cation during the proxy fight.

 

What is crazy in that story IMO is that they fight the activist with everything they got, then after winning or defending Saxberg (CEO) and his plan, they fire him a few weeks later, then they adopt Cation's plan...

 

The issue or concern with investors currently is time to execute, lack of trust in the team (all internal) and what will be left exactly after 12-18 months (production level, which assets, cash flow, capex).

 

The stock has traded sharply downward since Bryksa has been confirmed CEO (investors wanted to see an outsider to restructure), plan announced and with rejection of anything Canadian energy related since TransMountain disaster last Thursday.

 

At around $7 CAD, you are getting the Canadian producer with highest netbacks (over $40 in Q2), 90% liquids and mostly light oil, Price to cash flow of around 2 times, EV/DACF of around 4 times, price per flowing of $48,000 per boe/d, 0.45 times book value, 0.29 times NAV, 1.1 times PDP NAV, dividend yield of 5.1%.

 

You can do a sum of the parts, you can compare it to recent asset sales, you can compare to peer valuations, you can look at absolute valuation, but the conclusion should be that this is incredibly cheap.

 

While we never know exactly where oil should go, it is still above $67 WTI and $76 Brent. This company has easily survived $25 oil and owns some of the best, lowest cost assets in Canada.

 

There is definitely blood in the streets in Calgary these days. It feels like late 2008/early 2009...

 

Cardboard

[StevieV]

I own CPG.  Obviously, it has been getting crushed, and my position along with it.  Down another 2+% as I type this morning.  The market hates Canadian oil and gas, and CPG more than the average Canadian O&G company.

 

As you say, I think it s a value here.  But, I thought it was a value 20% ago.  The yield is starting to be pretty significant.