Back in 2008 when the crisis hit, Crescent Point Energy (TSX: CPG) was an income trust that investors relied upon to fund their retirement. When the time came to ditch the income trust structure, investors were worried. But in the end, after the conversion back to a dividend paying corporation in 2009, Crescent Point is still to this day relied upon by investors to provide a healthy income stream. The more things change the more they stay the same.
In July 2008, oil hit a high of US$147/bbl only to come tumbling down in the midst of the financial crisis and ensuing recession to lows of $32 in December 2008. While oil is back over $100, it has been a wild ride for producers to say the least. Let’s take a look at how Crescent Point’s stock has fared through it all.
Source: Capital IQ
Light oil has demonstrated strong fundamentals. And Crescent Point has been extremely successful in implementing its strategy of acquiring, exploiting, and developing high quality, long life reserves. Through the years, the market has questioned the company’s strategy of acquiring and paying out such a high dividend. But Crescent Point has shown the sustainability of its strategy. It emerged as a low cost producer with high quality reserves, and these two factors made all the difference. Its stock price has appreciated nicely over the past 5 years, and that isn’t even the whole picture. Crescent Point has been paying a very attractive dividend all the while, providing a regular stream of low tax income for the investor. The current dividend yield is over 7%, and has always been high during the last 5 years. The company has paid out a whopping $2 billion to shareholders in the form of dividends during this time.
| ($ mlns) | ||||||
|
2008 |
2009 |
2010 |
2011 |
2012 |
LTM 2013 |
|
| Revenue |
996.7 |
821.9 |
1,291.5 |
1,822.5 |
2,226.8 |
2,479.5 |
| EBITDA |
896 |
451 |
824 |
1,277 |
1,799 |
1,637 |
Crescent Point’s revenue and earnings dipped in 2009 due to falling oil prices, but the company recovered right along with oil prices. This was driven by the company successfully using horizontal drilling techniques in order to maximize the productivity of its asset base. In fact, Crescent Point has a strong history of production increases as well as low cost production. In the latest quarter production increased 21% from the same period last year, to 117,700 barrels of oil (boe) per day.
Bottom Line
Crescent Point has fared extremely well since the crisis due to its asset quality, good operations, and a top notch management team. It has emerged as Canada’s largest producer in the attractive Bakken region and although investors must keep an eye on its payout ratio as a risk to the company, Crescent Point will probably continue to thrive as long as oil prices remain high.
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Fool contributor Karen Thomas does not own shares of any of the companies mentioned at this time. The Motley Fool has no positions in the stocks mentioned above.
