Crescent Point Energy will cut its exploration and development by nearly 40% to lower its expenses, but it still expects to increase its output given quality drilling sites.
CRESCENT POINT ENERGY (Toronto symbol CPG; www.crescentpointenergy.com) produces oil and natural gas in Western Canada, with a focus on its Bakken light oil development in southeastern Saskatchewan. Its output is 90% oil and 10% gas.
In the three months ended March 31, 2016, Crescent Point’s cash flow fell 12.8%, to $378.0 million from $433.6 million a year earlier. The company raised its daily output by 15.9%, but lower oil and gas prices offset that increase.
Cash flow per share dropped 22.9%, to $0.74 from $0.96, because Crescent Point issued shares to pay for acquisitions. They include the $1.5 billion the company paid for Legacy Oil + Gas in June 2015.
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Crescent Point will spend $950.0 million on exploration and development spending this year. That’s down 39.2% from $1.56 billion in 2015.
Even with the lower capital spending, drilling success should increase the company’s 2016 output to an average of 167,000 barrels of oil equivalent per day from 163,631 in 2015.
To conserve cash, Crescent Point cut its monthly dividend by 70.0% with the April 2016 payment, to $0.03 from $0.10. The shares now yield 1.9%. The stock trades at just 5.9 times its forecast 2016 cash flow per share of $3.27.
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Not a bad choice for a smaller oil company. CPG is now taking advantage of low oil to pick up some new properties at bargain prices.