Crescent Point Energy Corp.: A Buy Below $10?

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) trades close to its multi-year lows, despite a strong rally in crude prices in recent months. Is the stock oversold?

| More on:
The Motley Fool

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is back below $10 per share, and investors who’d missed the last rally are wondering if this is a good time to buy the stock.

Let’s take a look at the current situation to see if Crescent Point should be in your portfolio.

Oil outlook

Oil finally took a breather recently, after an impressive surge that saw WTI rise from about US$42 per barrel in June to above US$57 in early November.

At the time of writing, oil is recovering from the latest dip and trades close to US$56.50.

What’s driving the market?

As always, oil traders are reacting to potential supply disruptions.

The story for the past year has been OPEC’s agreement with a handful of other countries to reduce global supply by 1.8 million barrels of oil per day. The initial pact, launched at the end of November last year, was supposed to run through June.

The group extended the agreement into the first quarter of 2018, and recent comments designed to prop up prices have suggested the program will continue beyond that point.

Investors initially reacted positively to the announcement late last year, driving oil to US$55 per barrel, but they started to doubt OPEC’s ability to deliver on the plan, as some countries missed targets, and rising U.S. production provided a headwind to higher prices.

Since June, oil has found support from geopolitical concerns, including Iraq’s recent skirmishes in Kirkuk. Iraq is the second-largest OPEC producer, and the Kurdish region of the country, which held an independence referendum in September, is home to Kirkuk’s significant oil reserves.

Saudi Arabia’s arrest of several high-level members of the royal family also has market watchers feeling a bit uneasy. In addition, the recent resignation by Lebanon’s prime minister Saad Hariri has the media talking about a potential escalation of conflict in the Middle East between Saudi Arabia and Iran.

If things really get ugly in the region, oil could skyrocket.

Should you buy Crescent Point?

With the stock back below $10, Crescent Point isn’t too far off its multi-year low reached in recent months.

That has some contrarian investors kicking the tires, given the company’s targeted year-end production growth of about 10% per share and the fact that Crescent Point owns some of the most attractive assets in the patch.

The debt position remains high, but the company is well within its lending covenants, and management is selling non-core assets to shore up the balance sheet.

Crescent Point used to be a dividend darling in the Canadian energy sector, but it had to slash the monthly payout from $0.23 per share to $0.10 and then again to $0.03, where it currently stands.

That’s good for a 3.8% yield right now, which isn’t too shabby if oil is destined to go higher and the company can maintain the payout.

Where oil goes from here is anyone’s guess, but investors who have a bullish view on the market might want to consider a small position in Crescent Point while it remains out of favour.

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 stock mentioned.

More on Energy Stocks

Red siren flashing
Energy Stocks

Buy Alert: 4 Reasons Why TC Energy Stock Is a Must-Own Now

A large-cap energy stock is a strong buy today for four compelling reasons.

Read more »

Oil pipes in an oil field
Energy Stocks

Here’s Why Enbridge Stock Looks Like a Great Buy

Consider looking at Enbridge (TSX:ENB) if you seek high-yielding but safe dividends for your self-directed portfolio.

Read more »

oil and natural gas
Energy Stocks

3 Energy Stocks Already Worth Your While

TSX energy stocks could shine for much longer. Here's why Canadian Natural Resources (TSX:CNQ), Parex Resources (TSX:PXT), and another oil…

Read more »

Utility, wind power
Energy Stocks

Brookfield Renewable Partners Stock: Buy, Sell, or Hold?

BEP stock (TSX:BEP.UN) now trades at half its share price back in 2021. So what should investors do with this…

Read more »

Energy Stocks

2 No-Brainer Energy Stocks to Buy With $5000 Right Now

Cenovus Energy is one of two high quality energy stocks that are undervalued and well-positioned for long-term success.

Read more »

Gas pipelines
Energy Stocks

Here’s Why Enbridge Is a No-Brainer Dividend Stock

Enbridge stock has resilient operations, significant competitive advantages and a safe payout ratio, making it a top dividend stock.

Read more »

Solar panels and windmills
Energy Stocks

Buy 849 Shares of This Super Dividend Stock for $3,100/Year in Passive Income

Looking for a super dividend stock to buy now? Here's a discounted top pick that can provide an ample income…

Read more »

Oil pumps against sunset
Energy Stocks

Suncor Stock: A Millionaire Maker?

With a renewed focus on extracting value from its integrated business, we can expect tremendous value creation from Suncor stock.

Read more »