CRESCENT POINT ENERGY CORP. $28.24 (Toronto symbol CPG; Shares outstanding: 443.4 million; Market cap: $12.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.8%; 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 92% oil and 8% gas.
In the three months ended December 31, 2014, Crescent Point’s cash flow rose 7.4%, to $572.9 million from $533.3 million a year earlier. The company raised its daily output by 20.5%, which offset lower oil prices and increased its cash flow.
Cash flow per share fell 5.2%, to $1.28 from $1.35, because the company issued shares to pay for acquisitions, including $378.0 million for oil properties from Lightstream Resources in September 2015.
Like many oil and gas producers, Crescent Point plans to cut back on exploration and development spending. This year, it will devote $1.45 billion to this purpose, down from $2.17 billion in 2014.
Even with the lower spending, the company’s 2015 output should rise to an average of 152,500 barrels of oil equivalent a day from 140,800 in 2014. But with oil prices now under $50 U.S. a barrel— and gas prices near five-year lows at $2.68 U.S. per thousand cubic feet—Crescent Point’s per-share cash flow will likely fall 29.7% this year, to $4.02 from $5.72 in 2014.
The stock now trades at 7.0 times this year’s forecast cash flow per share. That’s reasonable for a company with strong potential to grow when oil and gas prices recover. As well, the $0.23-a-share monthly dividend, which yields 9.8%, appears safe, even at today’s lower prices.
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