Current CPG Stock Info

Crescent Point will maintain dividend despite 28% CapEx cut
Two companies this week, Crescent Point Energy Corp. (ticker: CPG) and Concho Resources Inc. (ticker: CXO), released forward looking statements projecting increased production in 2015, regardless of commodity prices.

Crescent Point, which is based in Calgary, Alberta, said in its announcement that the company has set a capital expenditures budget of $1.45 billion for 2015. With that budget, CPG expects to generate average daily production of 152.5 MBOEPD, a 9% increase over 2014 gu...

Analyst Commentary

BMO Capital Markets Group:

2015 Budget Ramps Down; Disciplined on Growth
Concho announced updated production and capital spending guidance for 2015 (it had indicated lower activity on its 3Q call beginning in 1Q15 if oil prices remained weak), in which production growth is expected to be 16-20% (vs. 28-32%) with capex of $2Bn (vs. $3Bn). While this is a meaningful cut to growth, the updated budget does imply a modest improvement in capital efficiency ($38,000 per Boe/d vs. $45,000 per Boe/d), which we think is more due to high-grading than assumed service cost reductions (new presentation showed historical well costs in IRRs). While total capex was reduced by one-third, the Delaware Basin saw only a 25% cut, while the Midland and New Mexico Shelf were reduced by 50%. Rig count is expected to drop from 36 currently to 25 by midyear, a level which will be held through year-end 2015. No substantial changes were made to the hedge portfolio in the updated presentation, while nat gas realizations are expected to be weaker on lower NGL prices. Current income taxes are now expected to be $40-50mm (vs. 15-25% of total), which appears high, although it’s unclear what price deck is assumed or how much of a lag is involved.

Impact & Analysis
Similar to other oily peers, we estimate Concho plans to reduce capex to maintenance levels, and this should result in flat Q/Q production in 2H15 with ~$100mm per quarter CF outspending at NYMEX. For the full year, we estimate a manageable ~$600mm of CF outspending and debt/EBITDAX at 2.4x by year-end 2015 (NYMEX). Assuming a flat ($2Bn) budget in 2016 (where the bigger reduction in our estimates was), we estimate production growth of 7% on ~$500mm CF outspending and leverage at 2.6x by year-end (NYMEX). While leverage is above historical averages, we expect it to remain stable in 2016+, with Concho able to deliver good growth near cash flow at the strip, in addition to remaining one of the best-positioned E&Ps to accelerate if prices improve.

Valuation & Recommendation
We rate Concho shares Outperform with a $100 target price.  

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