On May 10 Crescent Point (CPG) closed a deal acquiring a bundle of land plus both producing and developing wells in the Kaybob Duvernay region of Alberta Montney area for $ 1.7 billion.This purchase and two previous ones ( in the Kaybob Duvernay area) has dramatically changed the profile of CPG.In 2021 CPG bought Kaybob Duvernay assets from Shell Canada for $900 million and in December,2022 purchased Kaybob Duvernay assets for $375 million from Paramount Resources.These 2 purchases plus the $1.7 billion purchase from Spartan Delta in May, 2023 have caused a substantial shift in the CPG profile. Consequently CPG had a quite positive Q1 report although the deal with Spartan Delta only closed on May10 so operating for only half of the quarter.
The first Quarter of 2023
Q1 Performance
This increased production is matched by better financial performance.Foremost is the fact that CPG generated $278 million of excess cash flow.And it paid down debt by $445 million in Q2.Consequently although another $1.7 billion of debt was added to purchase the Alberta Montney assets this brought total debt to only $3 billion.Consequently debt now(before the North Dakota sale) is only 1.4 times the adjusted funds flow.In fact CPG did so well in Q1 that they paid out a special cash dividend of $.035 per share worth almost $20 million.
2023 Performance
Subsequent to this quarter Crescent Point sold off it's property in North Dakota for $625 million.This will reduce their 2023 output at a time when the price of oil is expected to rise.However output will not suffer substantially.As before the sale CPG guidance was for 166,000 boe/day which is up from 132,000 boe/day in 2022.But CPG is counting on the prolific production coming from their Kaybob wells.Consequently their revised guidance for 2023 is now still a healthy 161,000 boe/day. Their Q1 net income was a healthy $.39 per share.This means that annual e.p.s. could be as high as $1.70-$1.75 per share with a little price escalation in oil in the second half of the year.Even $85 a barrel could bring this result.This would bring a price tag of $12-$12.50 with only a P/E of 7 times.
A successful Strategy
Crescent Point has found their properties in the Kay Bob Duvernay region to be more productive than originally thought.And they have added another drilling rig to furthet increase production.As a result their total output has increased and they were able to release acreage in the Bakkens region of North Dakota which has a high decline rate.This has reduced their debt to a reasonable level while not affecting total output by a significant amount.And this puts them in a position to buy another small property in the KayBob region of the Alberta Montneys in late 2023 or early 2024. 
Dale Mcintyre (M.S.Sc) is a freelance writer that writes for several brokers including ZacksInvestment Research.
https://www.marketbeat.com/ www.motleyfool.com
Dale Mcintyre (M.S.Sc) is a freelance writer that writes for several brokers including ZacksInvestment Research.https://www.marketbeat.com/ www.motleyfool.com
