Winter Price Slump: Buy Crescent Point Energy Corp., Pacific Rubiales Energy Corp., and Baytex Energy Corp.

Take advantage of perceived weakness in the energy patch by investing in Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG), Pacific Rubiales Energy Corp. (TSX:PRE), and Baytex Energy Corp. (TSX:BTE)(NYSE:BTE).

| More on:
The Motley Fool

Growing investor concerns over the southerly direction of crude prices — with West Texas Intermediate hitting its lowest point in months coupled with the seasonal winter price slump — are creating investment opportunities in the patch. Many of the big names and strongest performers are seeing their share prices pummeled in recent weeks.

Let’s take a closer look at three players in the patch that I believe represent solid investment opportunities on recent share price weakness. 

Crescent Point Energy Corp.

Light oil heavyweight Crescent Point Energy Corp. (TSX: CPG)(NYSE: CPG) has seen its share price slump 10% over the last three months as investors flee the patch amid growing concerns about the drop in the prices of crude. I recently examined the impact this could have on its monster dividend yield. But despite some concerns, Crescent Point still shapes up as one of the best dividend-yielding investments in the patch.

The company has a solid asset base composed of over 614 million net barrels of crude. This gives it the ability to develop its own assets without any need to continue making accretive acquisitions in order to boost oil production and cash flow so as to sustain its dividend.

It is also generating a healthy margin, or netback, per barrel of crude produced, which for the second quarter was $54.75, indicating there is considerable room to absorb lower crude prices.

More importantly, in a difficult operating environment is Crescent Point’s low degree of leverage, with net debt being a mere 1.2 times funds flow from operations. This indicates that it can comfortably raise debt to continue to fund accretive acquisitions, thereby boosting production and funds flow or direct the funds raised to meet financial obligations.

All of this, in conjunction with the company’s juicy 6.5% dividend yield, makes it a worthwhile addition to any investor’s portfolio on recent weakness.

Pacific Rubiales Energy Corp.

Colombia’s largest independent oil producer, TSX-listed Pacific Rubiales Energy Corp. (TSX: PRE), has seen its share price pull back 8% over the last three months as crude prices have continued to soften. This, I believe, makes it appear an attractive buy for investors, with the company reporting record crude production for the second quarter of 2014 in addition to a stunning netback of $62.76 per barrel of crude sold.

It also has a substantial asset base with over 500 million barrels of crude in Colombia and Peru, with a range of programs under development that are assets to boost oil production further. These factors in conjunction with its low degree of leverage, with net debt being a mere 2.2 times funds flow leaves it well positioned to weather any sustained downturn in crude prices and grow profitability through increasing production.

In addition to its steadily increasing and sustainable dividend yield of 3.6%, the shares appear attractively priced on recent weakness.

Baytex Energy Corp.

Intermediate oil producer Baytex Energy Corp. (TSX: BTE)(NYSE: BTE), has seen its share price slide 9% over the last three months as oil prices have softened. Yet after closing its transformational acquisition of Aurora Oil and Gas, which includes that company’s light oil acreage in the sweet spot of the Eagle Ford Shale, it has built a solid operational foundation.

This in conjunction with its now credible netback of $40.74 per barrel leaves it well positioned to weather any sustained downturn in crude prices. Meanwhile, its juicy yet sustainable dividend yield of 5.6% makes it an attractive acquisition for investors, seeing them rewarded for their patience until industry fundamentals improve.

All three companies are well positioned to weather any sustained downturn in crude prices while still retaining solid growth prospects, which, coupled with tasty dividend yields, makes them an attractive investment on any pullback.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Energy Stocks

Solar panels and windmills
Energy Stocks

How Brookfield Renewable Stock Gained 40% in a Month

Brookfield Renewable stock (TSX:BEP.UN) surged in share price from a landmark deal and strong earnings, leading to a 40% jump.

Read more »

analyze data
Energy Stocks

Check Out This Soaring Stock, up 469% in 5 Years, With More Gains Likely to Come

If there is perhaps one growth stock that's just taken over in the last five years, it's this monster of…

Read more »

gas station, car, and 24-hour store
Energy Stocks

Is it Too Late to Buy Suncor Stock?

Suncor Energy stock has rallied big in the last year, but expect it to move higher as efficiencies keep rolling…

Read more »

Oil pipes in an oil field
Energy Stocks

TSX Energy Sector: Best Stocks to Buy in May 2024

Energy stocks like Suncor are generating massive amounts of cash flows and paying out significant dividends.

Read more »

Man holding magnifying glass over a document
Energy Stocks

Bargain Hunters: Is it Too Late to Buy Enbridge Stock?

Enbridge is up about 10% in recent weeks. Are more gains on the way?

Read more »

Oil pumps against sunset
Energy Stocks

A Dividend Giant I’d Buy Over Suncor Energy Stock

Suncor Energy stock has crushed the broader markets in the last 20 years. But this TSX energy stock has beaten…

Read more »

oil tank at night
Energy Stocks

2 Incredibly Cheap Energy Stocks to Buy Now

Two cheap energy stocks are the best deals in TSX’s top-performing sector in 2024.

Read more »

grow dividends
Energy Stocks

Growth Spurt: 2 TSX Stocks Set to Skyrocket

Two growth stocks in expanding, niche markets are set to skyrocket further in 2024 and beyond.

Read more »