Should You Buy Crescent Point Energy Corp. or Baytex Energy Corp.?

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) are enjoying nice rallies, but one might be a better bet right now.

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Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) used to be two of the top picks in the energy patch. The rout in oil prices has taken its toll on both stocks, but a recent rally off the lows has investors wondering if now is the time to buy.

Let’s take a look at the two companies to see if one offers a better opportunity.

Crescent Point Energy

Crescent Point’s shares are up nearly 50% since the middle of December. The support has been driven by a rebound in oil prices as well as the company’s commitment to maintain its dividend payment of $2.76 per share. The payout currently yields about 8.5%.

Crescent Point recently announced a 28% cut to its 2015 capital program. The reduction looks pretty harsh as a headline number, but investors need to look at the bigger picture because the company is forecasting very little change in production levels.

Crescent Point said it now expects 2015 daily output to be about 153,000 barrels of oil equivalent per day (boe/d). This is only 2,000 boe/d less than the previous guidance despite the large capital expenditure cut.

The stubborn position on the dividend is easier to understand when you look at Crescent Point’s aggressive hedging program. The company has about 50% of its production hedged above $90 per barrel for the first six months of 2015. This is helping offset the current weakness in the crude market and gives Crescent Point some breathing room to see where oil prices are headed.

Crescent Point tends to be aggressive on the acquisition front, and investors should expect the company to add strategic assets in the next 12 months as weaker peers are forced to sell off properties.

Baytex Energy

Last summer, everything was going right for Baytex investors. The company closed the acquisition of Aurora Oil and Gas Limited and increased its dividend by 9%. At the end of August, the stock traded at $48 per share.

Then the wheels fell off. The slide in oil prices began to pick up steam, and the market started to penalize anyone with production in the shale plays. In early December, Baytex cut its dividend by 60% and reduced 2015 spending by almost a third. The stock bottomed out around $15 per share but has since risen more than 50%.

Baytex’s drastic dividend cut came as a surprise because the company has 37% of its net WTI exposure hedged at almost $95 per barrel for the first half of 2015.

Production growth has been robust, driven by better than expected results from the Eagle Ford assets acquired in the Aurora purchase. The company plans to dedicate the majority of its capital to these properties in 2015.

Baytex’s current dividend of $1.20 yields about 5% and should be safe.

Which should you buy?

The easy money has already been made in both these stocks. Crescent Point’s big yield is certainly attractive if you believe that oil prices will continue to improve through the second half of 2015. The two stocks have risen about the same amount from the December lows, so the added yield at Crescent Point is a nice bonus. The company also has a market cap of $15 billion compared to Batex’s $4 billion, which is important for making acquisitions.

At this point, Crescent Point is probably a better choice for income investors, but Baytex has some great assets that could make it a prime takeout target.

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.

Fool contributor Andrew Walker has no position in any stocks mentioned.

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