Crescent Point Energy Corp.
(CPG-T) C$10.48
Q3/22 and 2023 Guidance As Expected. Small Special Declared
Event
Q3 Results, Declares Special Divi, Announces Land Acquisition, Nudges Capex
Impact: NEUTRAL
Second Quarter Headline Numbers Meet Street Expectations: Q3 production of 133.0 mBOE/d was ahead of TD's forecast (131.2 mBOE/d) and consensus (131.4 mBOE/d). Volumes were up ~3% Q/Q. CFPS of $1.00 was in line with TD ($1.01) and consensus ($0.99).
Special Dividend Formally Announced: Crescent Point declared a $0.035/shr special dividend ($19mm). This is incremental to the unchanged quarterly base dividend of $0.08/shr ($45mm) and 1.4% share count reduction ($75mm) in Q3. Combined, the quarterly return of capital equates to 2.4% of the current share price.
Our View: Given the share price reaction, and conversations with clients, it appears to us there may have been the perception that the special dividend may have been larger. However, in our view, equity holders will continue to reap the benefit of CPG's commitment to return 50% of FCF (above the base dividend) through a combination of special dividends or buybacks - the split between special dividends and the NCIB is less relevant to us.
A Few Interesting Operational Updates, Specifically: i) CPG expanded its Duvernay footprint with the acquisition of 80 sections for $87mm ($1,700/acre); ii) brought on its third Duvernay pad at an average IP30 rate of 900 BOE/d (81% C5+); and 3) drilled a multi-lateral (unfractured) well in the Viewfield Bakken.
2022 Volumes Tracking Guidance, Capex a Bit Higher. 2023 Better Than Expected: CPG reiterated its 2022 production guidance, but indicated that it expects capex to be $950mm (was $875-900mm). For 2023, CPG is formally guiding to 134-138 mBOE/d (~3% y/y growth) based on a capex budget of $1.0-$1.1B.
Our View: Given continued inflationary pressures, mid single digit capital increases are likely to be the norm across industry this quarter. 2023 volume guidance was modestly higher than we expected on a comparable capex estimate.
TD Investment Conclusion
CPG offers modest growth, an improving asset portfolio, a prescribed shareholder return commitment, minimal balance sheet leverage, and an attractive valuation.