I have no business relationship with any company whose stock is mentioned in this article. Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research, Occassionally write articles on Tag Oil for the Panick High Yield Report, https://seekingalpha.com/account/research/subscribe?slug=richard-lejeune.
Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Steady progress in repaying the debt will have a similar effect. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. Management is trying to tell the market that not many can be bothered with these properties. Hence, this is an unusually profitable opportunity to take advantage of while it lasts. In the meantime, the slide above remains unchanged (and for good reason as this industry is very volatile). Therefore, the logistics challenges of growing fast can be very formidable. Management has kept the focus on extra cash flow at considerably lower prices. It also makes it hard for the market to value the current collection of assets. That will increase the ability of the company to retire some debt as the year proceeds. Sign up here for a free two-week trial. This very experienced management can handle a growth-by-acquisition strategy. I am not receiving compensation for it (other than from Seeking Alpha).
But 2020 abruptly stopped the transition. Management is free to issue as much of these securities as is necessary because all of the voting power is with the preferred shareholders. Larger companies like Crescent Point do not generally appreciate as much as do smaller companies. In the meantime, management is able to spend the generous cash flow to optimize acquired operations while drilling new production to increase the performance of the properties acquired. That is a huge advantage over many other companies that offer common stock (with potential capital gains due in the year the deal closes). I am not receiving compensation for it (other than from Seeking Alpha). Get analysis on under followed Oil & Gas companies with an edge. This article is an example of what I do. The big deal is the advantage of entering a market without a lot of competition. But there are also a lot of profit opportunities here. 
This managing is changing to an opportunistic hedging. The preferred stock elects the board of directors. There is a fear of great ratios without the necessary cash to pay investors. The high oil percentage of production allows an almost "guaranteed improvement" although the recent price increases of other products certainly "help the cause along.". That is good news for an industry that has managed to surmount several challenging downturns. Organic growth is somewhat down the priority list. This usually continues until the older wells no longer generate cash flow.
The acquisition provided significant exposure to the premium condensate market that exists in Canada. Since really no one in the industry saw the currently strong pricing on the horizon at the time they made the hedge, many in the industry are now selling production at the hedge price with limited exposure. In the meantime, management has announced the end of the hedging program. Mitigating those risks is the experience of management in doing "deals" and integrating those deals into a combined entity that is more valuable than its parts. Even though geology may usually give the advantage to Permian operators, there is nothing like a good old-fashioned bottleneck in the midstream capacity to completely obliterate that advantage. Not many of these kinds of companies are public. That should increase the competitiveness of the Uinta assets. A large company like this has a fairly diversified amount of production with an emphasis on light oil and condensate.
Furthermore, a selling price environment like the current one provides a fairly quick (if unexpected) payback of the sizable costs needed to begin secondary recovery in the first place. Not many companies can deleverage successfully in this industry. The low debt allows management to shut-in any unprofitable production while waiting for the next pricing recovery. So far, the recovery has been somewhat muted by the debt issues and the increase in shares outstanding. I am not receiving compensation for it (other than from Seeking Alpha). That payback can easily be protected with some hedging should the need arise.
For those where this type of investment is their "cup of tea", then it's time to consider getting in and fastening their seatbelts for a very exciting ride. The sale of some noncore assets can easily be replaced with a second rig drilling for a short time. But for Oil & Gas Value Research members, they get it first, and they get analysis on some companies that is not published on the free site. Interested? That is an unusual strategy that may not be properly valued by the market. Production growth will allow for a far superior cash flow stream, even if commodity prices drop significantly from current levels. That accounts receivable growth should diminish in the second quarter. But the real test of many of these acquisitions will be the performance of the assets during the next industry downturn. The first thing to notice is that the company is organized to delay the tax consequences of potential sellers. That is very good news for shareholders. Right now, there is more production exposed to commodity prices than has been the case for some time. In the meantime, the "shop 'til you drop" attitude is ok as long as the discipline remains in place to ensure relatively fast paybacks of assets purchased. But Mr. Market will still want to see that outperformance during an industry downturn. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. This group has long had a history of buying cheap and selling dear. The continuing low debt ratio also hints at bargain purchases. A large acquisition often takes a few years to optimize. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. Is this happening to you frequently? The ability to increase the dividend combined with low debt rate hint at better times to come.
Management had a plan that was rudely interrupted first by the OPEC pricing war and then by the coronavirus demand destruction. The investor is warned about this guidance by the word "initial". The backers of this company generally get involved to make a lot of money or they do not get involved.
The company also in effect "went public" through that acquisition. The result will be a far different company moving forward than was the debt laden company of years past.
Newer production tends to be a lot more profitable than older production.
I wrote this article myself, and it expresses my own opinions. But now Mr. Market demands proof of the ability to pay investors while growing the business profitably. The outlook at Ring Energy is very good for the first time in a few years. I am not receiving compensation for it (other than from Seeking Alpha). The dividend does have priority. The guidance above refers to the company "as is".
The costs appear more than reasonable.
In the meantime, there are a lot of deals for stockholder gains to be made.
This is a very conservative management that ran into an unfortunate future occurrence that no one saw coming. Many companies in this industry are keeping dividends at a low percentage of cash flow so that the dividend can be maintained during the next inevitable cyclical downturn.
Cash flow before changes in operating accounts should remain at least $35 million in each of the quarters. The growth in production and cash flow should go a long way towards resolving debt ratio issues that plague some companies. made. As those results become apparent, Mr. Market may look at the company in a far more positive light than has been the case in the past. The way that management gets deals is because they occupy a niche where sellers far outnumber demand for the "product". This is really the first business cycle where the results can be seen. Therefore, the reduction in cash flow may not be quite as significant as some investors expect. Growth will then come from bargain acquisitions that are accretive as well as organic growth. A large acquisition like this could take some years because of the size. with impressive track records of investment gains in a rare public vehicle. GAAP accounting therefore requires a noncash value adjustment of those hedges every reporting period. The acquisition should lead to above-average profitability gains throughout the business cycle. The newly merged company supposedly has the scale to acquire larger properties than the predecessor companies had separately. Many of them just want out and are not too picky about price.
Note that the operating expenses are on the high side. This was probably to be expected as the company grew and was able to acquire larger deals. Sign up here for a free two-week trial.
The properties to be sold have some older production that is likely more expensive to produce than the company average. That means this acquisition will payback faster than expected. Crescent Energy Financial Conservatism Description (Crescent Energy Fourth Quarter 2021, Earnings Slide Presentation). Fast growth has its own risks. There are going to be a lot more shares outstanding than was the case before the coronavirus demand destruction.
Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research, Occassionally write articles on Tag Oil for the Panick High Yield Report, https://seekingalpha.com/account/research/subscribe?slug=richard-lejeune. Now conditions are allowing a gradual return to the original plan. However, the higher than projected current prices often shield a situation like this from cash flow issues until enough new wells and lower costs have been established throughout the purchase. That change as well as the continuing speed of that change will likely determine the company performance during the next downturn. So, management did not have to choose between growth and debt repayment. Therefore, the gains will come from operating improvements and bargain basement deals. I analyze oil and gas companies like Ring Energy and related companies in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space. I am not receiving compensation for it (other than from Seeking Alpha). Many times, that plan of operation does not work. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The near term was updated with the second quarter report. Management experience should reduce the risk of fast growth and the chance of failure. Then again, the whole reason for acquiring assets is to improve performance. Crescent Point Energy Corp. (NYSE:CPG, CPG:CA) is a Canadian company that also trades on the NYSE. Crescent Point management has spent the last few years materially changing the company. Every single company in the industry will benefit from rising commodity prices.
Therefore, hedging programs are generally not valued at all by the market. Those debt ratings and the market price of the common should climb appropriately.
That can be a lot riskier because management does not hedge unless they think they need to.
This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research.
What is left out of the discussion is that there needs to be enough production at that wonderful netback to enable a decent return on investment and return on capital. Please disable your ad-blocker and refresh. ) The acquisition of the condensate production exposure is a huge plus for profitability in the future. Naturally the company will spend "first call" capital money on the highest margin area. Still, anything that produces positive cash flow is worth producing no matter the accounting reporting. The continuing cash flow is likely to result in more returns to shareholders through higher dividends and share repurchases. (Canadian Dollars Unless Otherwise Noted), Crescent Point Energy Excess Cash Flow At Far Lower Selling Prices (Crescent Point Energy First Quarter 2022, Earnings Conference Call Slides). This is not your typical company in that management will be growing through deals. I wrote this article myself, and it expresses my own opinions. Also, as the company becomes larger, each acquisition will become less material to the company so that recurring operations begin to dominate results. Disclosure: I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. Please. They also wisely initiated a share repurchase program that can be discontinued or suspended during times of weak commodity prices. Management increased the second quarter dividend. Management has some drilling opportunities to go with the original older production purchases.
Get analysis on under followed Oil & Gas companies with an edge. So many do not realize that the market determines profitability of cyclical companies by their performance throughout the business cycle.
The specific part of this is the Class B and OpCo units. The industry has largely moved past that several years back. I am not receiving compensation for it (other than from Seeking Alpha). Crescent's Uinta acquisition is looking more profitable than originally projected by management.
The company has projects on both sides of the border to minimize any adverse effects of currency exchange swings. This new company combines. Management has decreased the debt ratio to cash flow to 1.0. There is a lot of experience here in doing deals. Most wells drilled in the current environment pay back within months. Please disable your ad-blocker and refresh. Crescent Energy Company (NYSE:CRGY) has made several accretive acquisitions. A lot of companies during a boom often talk about cost reductions. Ordinary maintenance was delayed due to bankruptcy proceedings or seller financial distress. As the debt gets paid down, less money will be needed for that purpose to automatically increase the amount available to return to shareholders.
The reason is that the established production base is much larger. Crescent Energy Organizational Structure (Crescent Energy Fourth Quarter 2021, Corporate Slide Earnings Presentation). This is a Canadian company listed on the NYSE and the TSX that reports in Canadian dollars unless otherwise noted.).
It appears management is willing to bear some additional risk. That turns out to be the acquisition.
I wrote this article myself, and it expresses my own opinions. The company had an original plan to use debt to get to a proper level of production as the company left the development or lease acquisition stage. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. group has long had a history of buying cheap and selling dear. Therefore, expect Mr. Market to take his time assigning a decent value to the assets. The problem with a lot of companies that filed was the market often focused on the production decline rate as well as the lack of cash flow in the history. Generally, a faster payback raises the profitability of the acquisition. I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. This management has been digging the company from a debt hole for some years. I wrote this article myself, and it expresses my own opinions. But the evaluation of that ability by any investor considering an investment in this entity will be crucial as to the viability of the investment proposal. The company also in effect "went public" through that acquisition. The market awaits the benefits of the company's strategy. But the management strategy tells you that the company is not expected to remain "as is" because this management continues to shop for bargain deals. Please.
Because management continues to shop for bargains, there is likely to be more acquisitions that will materially change guidance during the current fiscal year. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. Probably the largest progress by far is the growth in cash flow before the changes in operating assets and liabilities. I am not receiving compensation for it (other than from Seeking Alpha). The current environment is likely to offer management an excellent opportunity to reduce operating costs.
As long as prices do not head back in the $40 range for oil, this company should recover nicely enough to be able to put the challenges of the past few years aside.
Much of the market is still fixated upon the negative cash flow days that are very unlikely to return to the industry. (Note: This article appeared in the newsletter on May 29, 2022, and has been updated as needed. And hello cash flow! Management has purchased a lot of older production that will be more expensive to operate. That points to a far above average management.
If you have an ad-blocker enabled you may be blocked from proceeding. Older production often has higher lease operating expenses as volume declines.
The corporate structure is set up to delay the tax consequences of any deal for selling shareholders. This is a very different strategy from the typical oil and gas company. That outperformance is likely to continue well into the future. The company is likely to grow quickly. Investors are advised to review all company documents, and press releases to see if the company fits their own investment qualifications. I am not receiving compensation for it (other than from Seeking Alpha).
(Note: This article was in the newsletter May 19, 2022, and has been updated as appropriate). This is a company that probably needs a year of the current prices to really get itself back on track. Is this happening to you frequently? I have no business relationship with any company whose stock is mentioned in this article. On the other hand, the company management appears ready to patiently "wait out" the market until the market recognizes the value here. Now let us see what the future holds. The upside of the older production is a lower decline rate. Management is now raising the guidance shown above due to the stronger than expected commodity prices. Now it always takes a few years for new techniques and technological advance to predominate. This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. These particular securities allow a seller to sell now and literally have years to plan out the tax consequences. That company itself filed bankruptcy with too much debt. Here, the debt levels combined with the very profitable wells will allow management to "drill its way out" of the whole situation.
Crescent Energy (NYSE:CRGY) is a KKR backed company with well-known John Goff as chairman. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications.
The Uinta is probably more problematic. What would remain unaffected is the early payback of expensive secondary recovery project costs. Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Therefore, the market is likely to look favorably upon continuing profit improvements as the cycle progresses. I have no business relationship with any company whose stock is mentioned in this article. I wrote this article myself, and it expresses my own opinions.
Is this happening to you frequently? But the ability to generate some very good cash flow should remain. These assets represent the majority of the old EP Energy (OTCPK:EPEG) company.
There is a lot of unconventional and secondary recovery companies with wonderful netbacks both historically and currently that do not have enough production to produce a viable amount of cash flow and profits.
The company is getting "back on track" with the original plan to convert to an operating company with an optimal amount of production.
Therefore, companies that produce heavy oil, for example, have a lower valuation in the current cycle despite often more profitable earnings because heavy oil is a discounted product. In this case, management appears to be in a very good position because that older production was purchased either in bankruptcy court or during a time of considerably lower prices. I wrote this article myself, and it expresses my own opinions. That means this company goes into the next cyclical downturn with the initial secondary costs paid back (regardless of what the accounting reports). ), was even better than the first quarter.
I have a high school teaching credential and an MA in Math Education.
Therefore, they are very likely to benefit the common investors.
I am a high school teacher for a decade. Whether or not you as a potential investor want to do the same is up to you. That should happen without any extraordinary actions of management. The risk here is the future performance of the business. That means any investor has to have a fair amount of faith in the ability of this management to do a decent job. Interested? But for Oil & Gas Value Research members, they get it first and they get analysis on some companies that is not published on the free site. Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Management announced a continuing rig program that should allow for production growth. I have no business relationship with any company whose stock is mentioned in this article. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland.
This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. That gives this company a little more exposure than is the case for many Canadian companies as well as access to the United States debt market. Disclosure: I/we have a beneficial long position in the shares of REI either through stock ownership, options, or other derivatives. These downturns will happen a lot faster (meaning they will not last long) because production declines quickly in the unconventional business that now dominates the industry. Not many of these kinds of companies are public.
Therefore, management was able to acquire properties for some extremely low prices. This article is an example of what I do.
Such an acquisition can be enhanced by the periodic sale of higher cost production (and then plowing that money back into new lower cost wells). Right now, it looks like that may happen again.
If you have an ad-blocker enabled you may be blocked from proceeding. This article is an example of what I do. This management team has accomplished a lot in the time it has been in control of the company.
I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. I am a high school teacher for a decade. But the oil price drop in 2015 followed by the 2019 decline (then came the OPEC Pricing War and the coronavirus demand destruction) has thoroughly disillusioned this crowd. (Crescent Energy Fourth Quarter 2021, Corporate Slide Earnings Presentation), (Crescent Energy Fourth Quarter 2021, Earnings Slide Presentation), (Crescent Energy Fourth Quarter 2021, Earnings Conference Call Slides). So, they have a whole lot of incentive to raise the price of the common stock a lot.
The fourth quarter earnings report has a huge mark-to-market" hedging adjustment that really clouds the operating results. Cost reductions and an emphasis on cash flow at lower selling price levels signal an outperformance during the next downturn. Crescent Energy Explanation Of Management Choice Of Acquisition Strategy (Crescent Energy Fourth Quarter 2021, Earnings Conference Call Slides).
So, that means earnings and cash flow will jump in the second quarter when compared to the first quarter. That left management with insufficient cash flow compared to the debt, with an asset story that was now meaningless to lenders. The market is waiting for that "projected profitability" to show on the quarterly results. That is combined with the risk of fast growth. That makes the change in cash flow real important. Further indications of future outperformance come from the emphasis of cash flow at much lower commodity prices and a focus on the debt ratio at those lower prices. That few years though has lowered costs considerably to make previously uneconomical acreage economic while moving other acreage into Tier 1 territory. This management is likely to continue the opportunistic acquisition strategy that was initiated before the business combination. The company has projects on both sides of the border to minimize any adverse effects of currency exchange swings.
Losses are far worse when the discount often expands during a cyclical downturn to produce an overall lower level of profitability than is the case with light oil. Consistent hedging is generally looked at by the market as a zero-sum game. I am a high school teacher for a decade. The Eagle Ford, in particular, is one of the most profitable basins in the United States. It also has an acquisition that will likely continue to provide a positive earnings influence that is not available to many of its peers of a similar size. Lower debt levels also argue for an enterprise valuation increase.
In fact, the management performance part of the compensation is 100% stock based. Management has an advantage in the form of some competitive secondary recovery prospects that have very low production decline profiles to lower the company average production decline each year.
To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. This new company combines two parties with impressive track records of investment gains in a rare public vehicle.
What has created this opportunity was a bunch of investment vehicles with little to no industry experience "jumping in" when times were good in the hopes of making a lot of money. Crescent Energy Production Growth Strategy In Eagle Ford And Uinta (Crescent Energy First Quarter 2022, Earnings Conference Call Slides). This management has done a lot for the company over the last few years. I have a high school teaching credential and an MA in Math Education. Time will tell how much the market values this management style.
That did not happen in the Eagle Ford where the oil was generally sold at a premium to the corresponding benchmark.
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