The numbers are in for the second quarter for Crescent Point Energy Corp (TSX: CPG)(NYSE: CPG). The quarter was full of acquisitions and higher production numbers. Although it is based in Alberta, the company’s drilling activities are in neighbouring Saskatchewan. While many still do not see Saskatchewan as “the place you oughta be” in terms of an oil play, Crescent Point has managed to grow into the No. 3 independent oil producer in the country.
So how good was this quarter for Crescent Point Energy, and will this affect its dividend yield of 6.3%?
Reaching new heights
Before I get to the hard numbers, let’s take a quick look back at the two major acquisitions that carried the company to new heights in Q2.
First, in May the company closed a $1.1 billion deal with CanEra in which it acquired 280 net sections of land in the Torquay formation. This was projected to add 10,000 barrels of oil equivalent per day of production.
One month later in June, Crescent Point announced it would be acquiring the assets of Polar Star Canadian Oil for $331 million. Located in the Viking oil play region just outside of Dodsland, Saskatchewan, this added 10,000 hectares of land to the company’s portfolio and brought its total land position to 37,500 hectares in the Dodsland area.
Viking region assets are prized as having strong rates of return that pay out quickly, and have been producing consistently for decades.
Record production
On the back of these acquisitions, the company’s total funds flow from operations rose in the quarter to $636 million from $504 million during the same period as last year. Net income bubbled up to $98 million, or $0.24 per share, up from $72 million, or $0.19 per share, in Q2 2013.
These are impressive net income numbers, as Crescent Point spent $1.5 billion in capital acquisitions during the quarter. However, this spending also brought its net debt to $2.8 billion compared to the $1.8 billion it owed at this time last year.
These promising returns were a result of average daily production increasing by 20,000 barrels, totalling 137,368 boe/day. This heightened output was also backed up by substantially better prices. During Q2 2013 the average selling price per boe was only $78.85, but this quarter it rose to $91.83.
Following the results, 2014 production targets have been pushed up to 138,000 boe/day from previous estimates of 135,000 boe/day.
The stock’s future looks bright
Despite the spending and debt, the company is still in a positive cash-flow position with $636 million in the quarter, a 26% increase over last year. Annual cash flow is projected to be $2.5 billion, up from previous estimates of $2.45 billion.
Investors should know that the company believes that cash flow growth “sets [Crescent Point] up to consider a dividend bump, I think, here toward the end of the year or the beginning of next year”. As mentioned earlier, the company already has a dividend program that yields 6.3% and pays out $2.76 per year.
The stock closed Friday at $43.80, just over the midway point of its 52-week range, and has an average price target of $51.50 with an outperform rating.
