Crescent Point Energy Corp. or Baytex Energy Corp.: Which Stock Is the Best Oil Play?

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) remain two of Canada’s most popular oil stocks.

Let’s take a look at the former dividend darlings to see if one is a better choice right now.

Crescent Point

Crescent Point is currently hovering around the $20 mark. That’s a long way from the $45 per share investors enjoyed before the meltdown in oil prices.

Despite the plunge, Crescent Point has actually weathered the storm better than many of its peers, and there is good reason for the strength.

The company continues to sport a strong balance sheet and efforts to reduce costs have been very successful. In fact, Crescent Point can now live within its cash flow at a WTI oil price of US$35 per barrel or better. That’s one of the lowest breakeven points in the patch and is a testament to the quality of the company’s asset base as well as its operational efficiency.

Oil is currently pulling back from recent highs, but even at the current price of US$46.50, Crescent Point is enjoying decent margins.

One item that sets Crescent Point apart from its peers is the company’s ability to maintain output despite a sharp drop in capital spending. Daily production in 2016 is expected to be slightly above 2015 levels, even after a 40% reduction in the capex plan.

Looking ahead, Crescent Point says it could generate $600 million in free cash flow next year if WTI oil averages US$55 per barrel.


Baytex hasn’t held up as well as Crescent Point, and an ill-timed acquisition is the reason for the bloodbath.

Back in June of 2014 Baytex traded at $48 per share. The company had just closed a game-changing $2.8 billion deal for assets in the hot Eagle Ford shale play, and investors were feeling pretty good about the move. After all, oil sat at US$100 per barrel and expectations in the patch were for stable or even higher prices.

As we all know, things haven’t worked out that way.

By the time oil dropped below US$30 per barrel in January of this year, Baytex was on bankruptcy watch and investors pushed the ticker below $2 per share. The stock has enjoyed a nice bounce on the back of stronger oil prices, but the current price of $7.25 is little consolation for long-term holders of the name.

Net debt remains just under $2 billion with none of the notes due before 2021, but the company’s market capitalization is still only about $1.5 billion. Operating costs are down to the point where Baxtex can cover expenses at WTI of US$40 or better. If oil stays between $40 and $50 Baytex should be able to keep its head above water, but higher prices are needed to boost investment and ramp up production.

One item to keep an eye on is a recent Canada Revenue Agency reassessment. Baytex could be on the hook for additional taxes and interest charges of $134 million if it loses the case.

Which should you buy?

Oil looks like it could be setting up for another summer swan dive, so I wouldn’t buy either name today.

However, if you believe oil’s recent pullback is simply a pause before another move higher and you are willing to step in now, I would go with Crescent Point. The company is in much better shape than Baytex and still offers strong upside potential on an extended oil rebound.

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

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