From RBCMay 3, 2018
Crescent Point Energy Corp.
Q1/18 – Going with the flow
Our view: Q1/18 results trailed consensus estimates, with capital also
slightly higher than expected. No surprises in operations, with the
exception of $225 million in non-core sales which are set to be finalized in
Q2. AGM tomorrow will provide results of the already tallied board votes.
Sector Perform rating and $13 price target unchanged.
Key points:
Q1/18 results – slight miss. Crescent Point reported Q1 production of
178,418 boe/d (RBC 179,250 boe/d; Street 179,240 boe/d), which drove
CFPS of $0.78 (RBC $0.83; Street $0.82). During the quarter, the company
invested $733 million on development (total capex of $739 million, Street
$685 million), drilling 314 (261 net) wells. Margins were generally as
expected, with the largest variances in realizations; for more details, see
Exhibit 2.
Guidance tweak, non-core sale announced. Capital spending guidance
for 2018 was reduced slightly, to $1.775 billion from $1.800 billion. This
is expected to drive production volumes of 183,500 boe/d (unchanged
from previous guidance), representing roughly 4% growth over 2017. Exit
volumes are expected to reach 195,000 boe/d (7% exit to exit growth),
unchanged from previous guidance. The company also announced a $225
million non-core asset sale, which management expects to close in Q2;
proceeds will be used to pay down debt.
Operations – in good shape. See Exhibit 2 for operational details; the
company drilled 287 (241 net) in the Williston/Southwest Saskatchewan
and 19 (12 net) in the Uinta. In the Duvernay, CPG participated in two gross
non-op wells (previously released). The first well flowed at an IP-30 rate
of approximately 570 boe/d and IP-90 of 515 boe/d (92% oil + liquids).
The second well produced at an IP-30 of 535 boe/d. CPG's budget includes
four net operated East Shale Duvernay wells in H1/18.
Balance sheet – plenty of liquidity. At year-end 2018, we expect CPG to
hold roughly $3.8 billion in net debt (inclusive of the effect of the $225
million disposition). This maps to a D/CF ratio of 2.0x vs. peers at 1.6x.
Liquidity is strong, with the company's $3.6 billion bank line roughly 53%
drawn (including working capital items).
Sector Perform. Our neutral stance remains unchanged, as does our $13
price target. CPG shares continue to trade at a discount with 2019E EV/
DACF at 4.1x vs. peers at 5.1x. In our view, key fundamental factors that
would drive an improved relative valuation include: (1) additional positive
data from the Uinta or East Duvernay; (2) stronger corporate growth rates
vs. peers; and (3) higher oil prices. The company will host its Annual
General Meeting on Friday, May 4. Management will provide the results
of the director nominations, which have been topical given recent activist
investor headlines.
Disseminated: