Analyst Notes Crescent Point Turn Focus to Its Balence SheetWe have no concerns about the alignment of management and the company's shareholders at this time and believe the company's solid record of conservative capital allocation remains consistent with a Standard stewardship rating.
Analyst Notes Archive Crescent Point Turns Focus to Its Balance Sheet
— No-moat Crescent Point Energy announced its 2021 budget and is eyeing lowering production levels. The company expects total production to range between 108-112 thousand barrels of oil equivalent per day, which is in line with our forecasts. The midpoint of the range represents a 9% decline from 2020 average levels and a 3% decline from third-quarter 2020 average levels. Crescent Point also plans to spend CAD 475 million-CAD 525 million in capital expenditures, which is below our previous forecast.
Management intends to use excess cash flows to improve the balance sheet, thus putting less focus on production growth in the near term. After incorporating our lower capital expenditure forecast, we are slightly increasing our fair value estimate to $2/CAD 2.50 from $1.75/CAD 2.25. Despite the higher fair value, the stock remains in 3-star territory. Due to our fair value sitting below the share price coupled with the stock's extreme uncertainty, we suggest that investors look elsewhere for investment opportunities in the Canadian energy sector. Although we consider Crescent Point's assets to contain several low-cost resource plays, high finding and developing costs on the firm's emerging assets dilute the company's cost structure. Consequently, full-cycle breakeven prices exceed our midcycle forecast of $55/bbl WTI. We are maintaining our no-moat rating and extreme uncertainty rating.