Veren Inc T.VRN

Ink Research

[retiredcf]

July 27, 2023

Morning Report: Crescent Point Energy stock keeps jumping

With so much attention focused on large US tech stocks which have been driving the Nasdaq higher this year, earlier this week we introduced the concept of the US technology outperformance club. Membership is made up of Canadian stocks that are breaking out and outperforming big US tech shares over the past month. Crescent Point Energy (CPG) qualifies as a founding member. It was a top gainer in the INK Canadian Insider (CIN) Index last week, advancing 9.6%. It was also a top index gainer on Wednesday, jumping 3.5% after the release of Q2 earnings.

Q2 production averaged 155,031 barrels of oil equivalent (78% oil & liquids), up 20% from a year earlier. The jump was driven by the $1.70 billion acquisition of Alberta Montney assets from Spartan Delta (Cloudy; SDE) in May which included about 38,000 boe/d of production. That was offset partially by about 7,000 boe/d of downtime due to Alberta wildfires. Q2 earnings worked out to $0.39 per share, down from $0.58 as unrealized derivative losses and lower commodity prices offset foreign exchange gains and production growth. The company expects to produce 179,000 boe/d on average in the second half of the year while generating over $1.0 billion in excess cash flow and ending the year at a net-debt-to-adjusted-funds-flow ratio of 1.0, assuming US$75/bbl WTI. The company aims to return about 60% of excess cash flow to shareholders via a combination of dividends and share buybacks. The board has declared a special dividend of $0.035 per share payable to shareholders of record as of August 8th, 2023. The company also has a quarterly base dividend of $0.10. The company reports that it bought back 9.7 million shares in Q2 at a total cost of $93 million. Insiders have been buying, and we will be watching to see if the buying continues with the stock up 27.7% over the past month versus the Nasdaq 100 Index, up 3.7%.