Crescent Point (CPG) buys Duvernay assets and sells Saskatcewan non-core assets

   Crescent Point Energy is another property not previously covered by any of my websites.It is also a stock that has traded as high as $11 in 2018.Crescent Point has been a casualty of the fallen price of oil.Yet as the oil price has regained most of it's lost ground crescent Point (CPG) has not recaptured it's old price.But most analysts agree that it will gradually move closer to it's old price level as prices and earnings and cash flow start to rebound.

  Crescent Point sold it's remaining non-core assets in southeast Saskatchewan for $93 million.And it used it ,with other funds, to reduce debt by $220 million.As the oil price rebounded this property was becoming more profitable.But CPG preferred to acquire the largely unexplored Kaybob Duvernay asset which CPG says is immediately accretive to earnings.

                      First Quarter Highlights

  Production for Q1 was 119,380 boe/day which was made up of mostly oil and natural gas liquids.Guidance for 2021 was given as between 132,000-136,000 boe/dayThis is largely because CPG is enhancing with water injection may of it's formerly inactive wells.This increase in production will flow through to earnings,especially with the increased oil price.Adjusted funds flow of $263 million translates to $.49 per share.And Cresent Point management expects to generate 2021 cash flow of $525-$650 million at a price of $55-$65 a barrel for 2021.                         

 

                           The Price of Oil                                                                                                                 Crescent Point management has been quite conservative in their price of oil and forecast of excess cash flow. This blog expects the price of oil to be $70-$75 a barrel for 2021.This would mean excess cash flow will likely be $600-$725 million for 2021.This is significant because CPG reduced debt by $135 million from excess cash flow in Q1.And has reduced $750 million of debt from it's total $2 billion debt since 2020.It is entirely possible that Crescent Point could reduce another $400-$500 million in 2021.Then it's debt/adjusted cash flow would be around 1 for the first time in several years.

                        Stock Price for 2021  

    CPG earned $.49 of adjusted cash flow per share in Q1.But production is expected to rise with it's new wells drilled and new wells to be drilled. in Q2,Q3 and Q4.Also production from it's Duvernay assets will be coming onstream soon.Crescent Point predicted $525-$650 million of excess cash flow with the oil price at $55-$65 a barrel.But this blog sees $70-$75 a barrel as more likely.There is also an outside chance that oil hits $80 a barrel in the hot summer.Therefore a forecast of $1.12-$1.20 of excess cash flow per share is a fairly conservative prediction.And this excess cash flow could even further reduce debt.In addition, with a P/E ratio of 6 to 8 times earnings this means that the price should be in a range of $6.75 -$9.00 with a median price forecast of $8.00.   https://www.zacks.com/,Home - Ontario Teachers' Pension Plan (otpp.com)

    

Enerplus increases N. Dakota acreage by 4 times and increases Dividend

  This was the first time that Workathon has covered the Enerplus story.And this coverage  was partly because Enerplus had a very active year in 2020.Enerplus is a rare entity as it gets a substantial amount of it's oil and gas production from American properties.Enerplus acquired two sizeable pieces of acreage in the Williston Basin in North Dakota.In fact, their acreage in North Dakota which is a core asset, is now 4 times bigger than in 2020.And the oil produced in the Bakken area in North Dakota earns W.T.I. prices not Western Canadian Select prices.Their timing appears to be excellent as oil prices have increased by almost 60% since the summer of 2020.Enerplus management has seen their stock price move from $2.50 a share in the summer of 2020 to $8.50 in 2021.  

First Quarter Highlights

 Production  showed a slight drop in output from Q1 2020. While funds from operations (FFO) increased from $1.51 in Q1 2020 to $2.08 in 2021.Most importantly e.p.s. went from $.01 to $.06 in Q1 2021 while adjusted net income went from $.09 to $.023 per share.And cash flow was robust enough to increase their dividend by 10% to $.033 per share which is considered a quite substantial dividend hike. 

 Williston Basin Properties

Enerplus produced only 6300 barrels from their first acquisition called the Bruin property in Q1 .It should probably get 35,000-40,000 barrels of production for the rest of the year.It also got 204 MMcf of natural gas from their Marcellus property.Since the acquisition, ERF has drilled 3 new producing wells in the Williston Basin.And Enerplus tells shareholders that it intends to spend 80% of their capital budget in the Williston Basin drilling 42 new well during 2021.

Annual Guidance

It is hard for ERF to accurately estimate what their production of oil,gas and liquids will be for the rest of the year.They offer an estimate of 111,000-115,000 of Barrels of Oil Equivalent (BOE) for total production in 2021.If true this would indicate a 20-30% increase.But this likely includes very little production from their new producing wells plus their wells just being drilled.And likely their revenues and earnings forecasted will be low as this blog sees further increases both in the price of oil and natural gas in 2021.The price of natural gas has doubled since the summer of 2020 as it moves with the price of crude oil.This blog sees that the adjusted net income reported for Q1 ($.23 per share) should be increasing every quarter of 2021.Consequently adjusted net income should be in a range of $1.10-$1.25 for 2021.And the P/E ratio could be as high as 8 to 10 times so this could put the price by yearend at $10-$12 per share.Investors need to watch the production and net income results in Q2 to see if this forecast will be accurate.

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