11:05 AM EST, 12/07/2021 (MT Newswires) -- Tudor, Pickering and Holt on Tuesday raised its rating on the shares of Crescent Point Energy (CPG.TO) to buy from hold and boosted its target price to C$7.50 from C$7.00 after the oil and gas producer raised its production guidance for 2022 and increased its dividend by half.
"We do our best to not be tardy for holiday parties, but while we're admittedly late to joining the BUY-rated list for CPG, we see catalysts still to come for the story in 2022 beyond yesterday's announced shareholder returns," analyst Matt Murphy noted. "Additionally, despite outperformance following yesterday's announcement, we model the company still trading at a healthy discount to oil-weighted E&P peers. While the 2022 outlook was positive vs. expectations, the story of the day was an earlier-than-expected acceleration of shareholder returns, with an earlier than expected 50% increase to the Q1'22 dividend to C$0.045/shr/quarter (3% yield) and the initiation of a C$100MM share repurchase program to be completed over the next six months. Beyond the announced buyback, the company expects to further increase shareholder returns as it reduces net debt towards its targeted 1.0x net debt/EBITDA level. We model CPG reaching its net debt target in the Q3'22 timeframe on strip pricing (early Q2'22 on our $72/bbl WTI price deck), with ~C$825MM in post-dividend free cash flow leaving ample room for increased returns. We model a similar 5% buyback program kicking off in the Q2'22 timeframe, good for a 9% total return yield. That said, if the company opted for a 50/50 free cash flow allocation framework in-line with peers once its debt targets have been achieved, it would represent significant upside to our currently modeled ~10% total capital return yield in 2022 and 2023. For the Canadian E&P group, we see CPG offering an attractive combination of 1) further shareholder returns catalysts to come in the coming quarters; and 2) a discounted free cash flow stream with torque to oil prices, of which we see greater risk-reward than natural gas at these levels. On strip pricing, we model the company trading at 20% FCF-to-EV and 2.7x EV/DACF in 2022 vs. peers at 17% and 3.7x."
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
Price: 6.63, Change: +0.49, Percent Change: +7.98