Crescent Point Energy: A Look at the Positives

Crescent Point Energy (CPG) has taken tough steps in order to overcome the problems in the oil market. But, despite its steps to reduce costs and improve the balance sheet, the company expects its production as well as PP reserves to increase this year, in the view of the fact that the company is utilizing advanced completion techniques at its high return assets that have low costs.

Let’s take a look at the moves adopted by Crescent Point to get better.

Taking tough steps

Crescent has decided to reduce its dividend in order to avoid extra debt. It has suspended its existing share dividend plan and dividend re-investment plan.

Instead, it has approved a monthly dividend of $0.10 per share, effective with the August dividend. This is a good move, as it will help the company remain competitive with its balance sheet in this extremely low oil and gas price environment.

Also, the company can now maintain 100% payout that should enhance its long-term per share growth for its shareholders. Moreover, it highlights its goal of internally funding its business model and not increasing debt or issuing equity to fund future growth.

In addition, the company is reducing its operating costs through efficiency improvements, such as introducing ported collars to cemented liner completions in the Bakken. For instance, at Viewfield Bakken, it reduced its drilling and completion costs by over 20% in the first half of fiscal 2015 as compared to 2014 levels. Crescent expects to further decrease its operating costs by another 10% in the second half of the year that should help in narrowing its net loss.

It expects a reduction in drilling days, improved methods for logistical planning, and less equipment for completions to drive extra costs savings. In fact, it expects this additional 10% reduction in costs to enhance its rate of return by more than 13% for its operations.

Conclusion

Crescent Point Energy is executing the right actions in order to remain competitive in a low commodity price environment. Moreover, its implementation of new technology should enhance its production at very low capital costs. As such, analysts expect its earnings to grow 128.20% by the end of next year. It has profit and operating profit margins of 3.27% and 17.79% despite the significant drop in oil prices, which is another positive. So, it will be a good idea to buy some shares of Crescent Point for the long run.

Published on Oct 16, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

Posted in ...