From Banque NationaleCrescent Point Energy Corp. Non-Core Asset Sale Adds Financial Flexibility CPG STOCK RATING TARGET EST. TOTAL RETURN (TSX; NYSE) C$8.34; US$6.40 Outperform (Unchanged) C$23.00 (Unchanged)
179.6% Path to Shareholder Return Is Paved Dividend Bump & Return of Capital Update In light of reaching its near-term net debt target quicker than anticipated, and supported by proceeds from non-core asset dispositions (more below), Crescent Point has announced a 23% increase to its quarterly dividend to $0.08/sh (from $0.065/sh), implying an annualized yield of 3.8% ($0.32/sh). Importantly, beginning in Q3, the Company plans to allocate up to 50% of FCF to shareholders via a combination of share repurchases and special dividends.
Given the current valuation, the Company anticipates allocating the bulk of shareholder returns to opportunistic share repurchases in the near term (we have assumed 80% to the NCIB). For context, we are forecasting FCF of $814 mln through 2H/2022e and an additional ~$1,700 mln in 2023e, implying ~$1,200 mln of shareholder returns over the same period (over and above ~$250 mln of current dividends). Considering the magnitude of FCF across our forecast period, we believe the Company could fully exhaust its existing NCIB (~57 mln shares, or 10% O/ S) by the time it expires in Q1/23, leaving ample room for special dividend announcements during this time period (commodity price-dependent).
Non-Core Asset Sale & Guidance Update During the second quarter and consistent with recent messaging, Crescent Point completed two non-core asset dispositions in the Viking and East Shale Duvernay, comprised of ~5,000 boe/d of total production (primarily liquids), for total proceeds of ~$300 mln. The revised 2022 production guidance of 130-134 mboe/d (from 133-137 mboe/d) reflects the asset sales as well as the previously announced severe weather impacts in North Dakota during Q2. Capex and opex guidance remains unchanged at $875-900 mln and $13.75-14.25/boe, respectively.
Valuation & Target Price Crescent Point trades at a discounted valuation of 1.3x 2023e EV/DACF relative to its peers at 2.0x and its three-year historical average of 3.3x. We reiterate our Outperform rating and our target price of $23.00, which remains based on a 2023e EV/DACF multiple of 4.0x.