New Rating!!!!! GLTALongs action list Buy TDCrescent Point Energy Corp. (CPG-T) C$9.63
Q4 As Expected. Strong Liquids Window Duvernay Pad
Event Q4 Result, YE-2022 Reserves, Incremental Duvernay Disclosure Impact: SLIGHTLY POSITIVE
Production and CF as Expected by TD/Street:
Production of 134 mBOE/d was in line with both TD (133 mBOE/d) and Consensus (134 mBOE/d). Similarly, CFPS of $0.93 also met TD/Street expectations of $0.92/$0.94). Shareholders Get Another Small Special Dividend: Crescent Point declared a second special dividend (payable March 17) of $0.032/shr. CPG pays out 50% of FCF (after base dividends) quarterly, anything up to that level that is not spent on buybacks could be returned to equity holders via a cash special dividend. Looking ahead, we assume there is sufficient room under the NCIB and do not forecast future incremental special dividends. Strong Gas and C5+ Rates from 6th Duvernay Pad: CPG achieved an average IP30 rate of 1,235 BOE/d (51% C5+, 15% NGLs) at Pad 6. This pad is southeast of the last CPG-operated pad and is the second pad to step outside the volatile oil window into the liquids rich window.
The C5+ yield of this latest pad is lower than the first four pads in the volatile oil window (~73% C5+); however, the gas rate is 50% higher and absolute C5+ production of 630 bbls/d is comparable.
Based on new company disclosures, CPG estimates it has an inventory of 225 locations in the volatile oil window, 125 locations in the liquids rich window, and 150 wells in the lean gas window. In aggregate, that represents ~$5.5B of future capital spending — or ~15 years at the current pace. At YE-2022 only 126 locations have been booked as reserves. Reserves Flat Y/Y.
Duvernay Reserve Additions Strong: CPG's 2P reserves were largely unchanged y/y; however, Duvernay reserves increased 31% and now represent 28% of the company's 2P reserves (22% at YE-2021).
Duvernay reserves were added at 2P F&D cost of ~$12/BOE, versus the corporate average of $28.80. TD Investment
Conclusion Crescent Point offers strong return of capital (12% of market cap in 2023E), low debt, growing exposure to a high-impact, liquids-rich play, and a relatively low valuation (2023E EV/DACF of 3.0x versus closest peers at 3.8x).