Crescent Point Energy: a Good Buy

Crescent Point Energy (CPG) announced second quarter ended June 30, 2016 total oil and gas sales of $645.9 million, down 17 percent year-over-year from $776.2 million during the same period last year.

Crescent Point Energy declared second quarter of 2016 adjusted net earnings from operations of $15.1 million or $0.03 per diluted share, down 63 percent year-over-year from $40.4 million or $0.09 per diluted share in second quarter of 2015.

The global energy mining company reported continued year-over-year decline in both its top and bottom lines primarily driven by the global weakness in energy demand and pricing coupled with the rising exploration expenditures, eating into the margins of the company.

Lowering expenses  

Crescent is focused on optimizing the operational and capital expenditures by strategically lowering the drilling days that means sustainable and lasting savings.
Particularly, the company has achieved approximately 10% average lowering of major resource plays as of 2015 and nearly 35% reduction achieved as of 2014. In addition, the capital expenses of Crescent continue to get better through weaker service rates and enhanced internal efficiencies.
Crescent Point Energy: a Good Buy
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Going forward, the company forecasts approximately $50 million reduction in core operational expenditures compared to the earlier 2016 budget projection.

The worldwide oil and gas producing company has adopted a strategic hedging strategy to uniquely hedge the oil and natural gas prices amid weakening global commodity demand and pricing environment to minimize losses and sustain its daily operations profitably. During, the second half of 2016, Crescent has hedged on an average 45% of total oil reserves coupled with 2017 the first half and second half uniquely hedged on an average 29% and 10% of total oil reserves respectively. This active hedging schedule minimizes the volatility of fund flows while providing improved stability to capital expenditure discipline and dividends.

Going forward, Crescent is expected to have significant prospective reserves upside with about 50% of consolidated drilling locations still remaining un-booked till date. Further, Crescent is strategically enhancing the recovery factors by infill and step-out drilling procedures, innovative technology and well-planned development of waterflood. Importantly, a 5% expansion of corporate recovery unit is estimated to add approximately 1 billion barrels of net oil reserves.

Focusing in the right places

The well-planned improvement in overall core and non-core capital expenditures coupled with a strategically implemented oil and gas pricing hedging program is believed to support the company in recovering strongly from the ongoing tough global operating environment while allowing it to deliver impressive shareholder returns over the longer term.

At Flat Lake, Crescent has delivered approximately 18,300 boe/d of total second quarter of 2016 production, a significant increase over nearly 1,500 boe/d during 2012. The company has identified about 1,300 total drilling locations till date compared to nearly 385 locations during 2012 and including, approximately 160 conventional and nearly 825 unconventional locations in addition to the recent acquisition of an extra about 300 total drilling locations.

Further, Crescent has also achieved approximately 2.9 billion barrels of fresh Oil-in-Place including, nearly 2.8 billion barrels of non-conventional fresh Oil-in-Place with about 0.9% recovery achieved till date and identification of approximately 100 million barrel of new conventional oil reserve in the strategic Ratcliffe zone that has smaller capital expenses and superior break-even rates.

Moreover, the successful prospective waterflood pilot starting during late 2016 is expected to develop significant chances for notable secondary retrieval opportunities across the Three Forks region situated North Dakota. Moving ahead, Crescent targets on growing the drilling inventory across Flat Lake that would replace a notable portion of the corporate drilling program for 2016. Operationally, Crescent achieved solid proprietary information linked to the acquisition of Ratcliffe and Torquay locations.

The key energy company is focused on generating sustainable long-term growth by strategically implementing commodity hedging strategy, cost optimization programs and targeting high-quality production drilling locations across the vast Flat Lake area.


Overall, the investors are advised to “Hold” their position in Crescent Point Energy Corp. considering the company’s high-value delivering projects that are believed to deliver sustainable long-term company returns while offering attractive shareholder returns but, currently weaker financial position with huge total debt of $3.27 billion that is comparable to the total cash position of $3.25 million, restricting the company to continue with its daily operations profitably. However, the profit margin of -41.07% seems disappointing and indicate no profit but loss.
Published on Sep 23, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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