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Baytex Energy Corp. or Crescent Point Energy Corp.: Which Stock Could Double?

Higher oil prices are sparking new interest in the energy sector, and investors are wondering which stocks have the potential to deliver big gains.

Let’s take a look at Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) and Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) to see if one is attractive right now.

Baytex

Baytex traded for $48 in the summer of 2014 and paid an annualized dividend of $2.88 per share. At the time of writing, investors can pick up the stock for about $3.75. As for the dividend, it’s long gone.

The plunge in oil prices hit the sector hard, but Baytex has suffered more than some of its peers.

Why?

The company made a large acquisition right at the top of the market, and that deal saddled Baytex with cumbersome debt.

Management has done a good job of keeping the company alive through the downturn. Baytex cut the dividend early, renegotiated terms with lenders, and raised capital at an opportune time.

As a result, Baytex has avoided major assets sales, and that’s where contrarian investors see potential. In fact, Baytex has calculated its net asset value to be about $9 per share, after a 10% discount.

If you think the company’s estimates are correct, this stock could move significantly higher as oil prices recover, and a move back to $8 is possible.

Crescent Point

Crescent Point has also taken a beating in the past three years.

It traded above $40 before the plunge and paid out a monthly dividend of $0.23 per share. As prices fell, Crescent Point had to pare back the dividend payments. The first cut took it to $0.10, and the second reduction brought the distribution down to $0.03 per share, where it currently stands.

That’s good for a yield of 3.5% at the current stock price.

Crescent Point’s balance sheet remains in good shape, and the company is targeting 2017 exit production growth of about 10% per share.

The stock has already bounced from $8 to above $10 per share in recent weeks, but more gains could be on the way if WTI oil can hold or extend its move back above US$50 per barrel.

Is one a better bet?

Baytex probably has more upside torque, but it is also a riskier bet in the event the recent oil rally falls apart.

Crescent Point is a popular pick in the sector. The company owns attractive reserves and has a strong track record of successful drilling and development. A double from the current price would likely require a big move in oil, but it is certainly possible.

If you can handle the added volatility, Baytex might be the more attractive contrarian pick today. Investors who prefer a safer bet but still want a shot at some strong upside might want to make Crescent Point the first choice.

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

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