New Rating!!!!! GLTALongs TD Investment Crescent Point Energy Corp. (CPG-T) C$10.62
Event Reports Q2 Results, New Well Results, Guidance Unchanged. Impact: SLIGHTLY POSITIVE
Fires Nip Production Potential, But Volumes Strong: Crescent Point, like other operators, was negatively impacted in Q2 by Alberta wildfires. Despite the ~7 mBOE/d of production offline in the quarter, volumes exceeded our expectation. Q2 production averaged 155 mBOE/d - ahead of TD (151 mBOE/d) and Consensus (153 mBOE/d). CFPS of $1.00 exceeded TD ($0.94) and Consensus ($0.97).
Our View: What is interesting to us is that the company would have averaged ~162 mBOE/d had it not been impacted by the fires. This would have exceeded the highest street-estimate prior to analysts adjusting down estimates to reflect the fire-related downtime. This signals strong underlying production performance, despite the wildfire impact. Robust Montney Results Continue: Crescent Point posted new well results on its recently acquired Montney lands. After initial cleanup, the 11 wells brought on stream during Q2 are currently averaging 1,300 boe/d (57% Oil, 8% NGLs).
Our View: With larger-scale pads (vs. 3 wells/pad under SDE-T), combined with drilling/completion optimization, we anticipate capital efficiency savings are probable. As with the Duvernay, which will see a second rig in Q4/23, the company suggested a second rig could be added to the Montney.
We assume this will occur early 2024 and will not impact our capital assumptions. Disposition Process Ongoing: No update was provided on the previously suggested disposition opportunities, we refer readers to our publication that outlines pro forma scenarios should they divest the North Dakota Bakken assets (here). Minor Tweak to Return of Capital Messaging: Crescent Point has committed to returning 60% of excess CF including the base dividend versus 50% excluding the base dividend previously. This aligns with our current assumption. We forecast this will be sufficient to repurchase shares/pay special dividends equating to 8% of the current market cap (beyond the base 4% yield) in 2024 at strip pricing.
TD Investment Conclusion
Crescent Point is delivering what we had anticipated, strong production results from scalable resource plays combined with robust return of capital.