​Crescent Point, North America's busiest oil dealmaker, turns focus to production

After five years of snapping up more oil assets than any of its peers in North America, Crescent Point Energy Corp. is turning its focus to getting more out of them.

Chief Executive Officer Scott Saxberg says that rather than scouting for new assets to buy, the company is trying to keep a lid on costs, drilling new wells in the Uinta Basin in Utah and developing operations in the Bakken formation.

“We’re very focused on our organic growth, getting after our plays,” Saxberg said in an interview at Crescent Point’s Calgary headquarters. “We have more than 12 years of drilling inventory ahead of us.”

From 2012 through last year, Crescent Point completed 15 acquisitions, the most of any oil explorer and producer on the continent. While the roughly $6 billion value of those takeovers ranked it fifth -- overshadowed by megadeals from giants such as Devon Energy Corp. and Encana Corp. -- it still averaged about $402.5 million per transaction.

As the acquisition spree expanded Crescent Point’s production, the debt it added has weighed on the shares. The company’s debt was about 93 percent of its earnings before interest, taxes, depreciation and amortization for the trailing 12 months to the end of 2012, according to data compiled by Bloomberg. By the end of last year, the company was carrying debt of 2.3 times Ebitda.

Crescent Point’s stock has been under particular pressure since selling C$650 million ($475 million) of shares in September. The company issued the equity to help pay down debt, but the market instead thought the money would be used primarily to increase production, Saxberg said.

The offering also was meant to help the company weather a potential dip in oil prices and uncertainty from the U.S. since the election, both situations that are far from being resolved, Saxberg said.

“That volatility is still there,” Saxberg said. “So we’re happy to have done the financing that’s put us in a strong position for this environment that we’re in.”

The company’s first-quarter results may have started to change investors’ minds. Crescent Point’s funds flow from operations rose 13 percent to C$427.1 million. Production was the equivalent of 173,329 barrels of oil a day, topping some analysts’ estimates. The shares rose 3.4 percent in the two days following the report.

‘Nice Tailwind’

“Good operational performance should serve as a nice tailwind for the company,” Chris Cox, an analyst at Raymond James, said in a note. “We see the stock as one of the few oil-levered producers with a compelling valuation, relatively strong balance sheet and a combination of free cash flow and visible production growth.”

Crescent Point was trading at an estimated enterprise value of 5.6 times earnings before interest taxes, depreciation and amortization, according to data compiled by Bloomberg. That’s the lowest valuation among its 10 peers for whom estimates were available.

Still, Crescent Point will need to demonstrate continued success at increasing production to win over investors, said Michael Harvey, an analyst at Royal Bank of Canada.

“Crescent Point’s future growth is highly dependent on continued drilling success within its development plays,” Harvey wrote in a note.

The company won’t be entirely absent from the deals market, though. In the first quarter, Crescent Point bought about 8,500 acres neighboring its current holdings in North Dakota for $100 million in cash. At the same time, the company agreed to sell conventional assets in Manitoba for C$93.2 million, essentially trading one property for the other.

“Anything we acquire will be small, tuck-in type acquisitions,” Saxberg said, “and we’ll sell non-core assets to pay for them.”

© 2017 Bloomberg L.P

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