Is Crescent Point Energy Stock a Good Long-Term Investment?

Crescent Point is one of the top energy stocks for Canadian investors, but after commodity prices have come down, is it still worth buying?

| More on:
Oil pumps against sunset

Image source: Getty Images

When it comes to buying high-quality energy stocks such as Crescent Point Energy (TSX:CPG), investors have the opportunity to see massive returns on their investments.

Energy is essential to our economy, and the faster that the economy is growing, the more energy is being demanded.

However, energy can also be a highly volatile industry, especially for producers, since the price of commodities can fluctuate rapidly. This makes it crucial to ensure that any energy stock you consider buying has high-quality operations and tonnes of long-term potential.

That’s why many investors are interested in Crescent Point Energy stock. It’s a mid-cap energy stock with a market cap of just over $5 billion. Furthermore, it has attractive operations that are well diversified across Alberta, Saskatchewan, and North Dakota.

Crescent point operates in regions with low-risk, high-return asset bases that allow it to earn significant cash flow.

It’s predominantly an oil producer, with just under 20% of its total production, roughly 130,000 barrels of oil equivalent per day (boe/d) in 2022, coming from gas.

So if you’re looking at buying crescent point energy stock, or any energy stock in general, here’s what to consider before pulling the trigger.

Crescent Point Energy stock’s operations have attractive margins

One of the reasons that Crescent Point Energy is such a popular stock among investors is that it can generate tonnes of cash flow from its operations. This gives it the potential to increase its dividend, buyback more shares, pay down some debt, invest in more long-term growth, or some combination of all four.

In fact, Crescent Point aims to pay up to 50% of its distributable excess cash flow (funds flow minus its capital expenditures and base dividend) back to investors.

And when you consider how impressive its operations were in 2022 and the significant netbacks it earns on each barrel of oil it produces, Crescent Point has a tonne of potential to continue growing for years.

Full numbers for 2022 aren’t in yet, but it’s expected that Crescent Point will have earned roughly $93.50 of gross revenue per barrel of oil equivalent (boe). Meanwhile, it’s also expected that its cash flow netback per boe will be just under $46.

So it’s clear how attractive Crescent Point’s operations have been, especially when oil prices have significant tailwinds pushing them higher.

That $46 of cash flow per barrel is expected to total over $2.2 billion in cash flow for Crescent Point energy last year, which accounts for more than 40% of its current market cap.

Furthermore, in 2023, although commodity prices have fallen and Crescent Point Energy stock is expected to earn less revenue, its cash flow is expected to stay roughly flat year over year. And thanks to share repurchases, its cash flow per share is actually expected to increase.

Therefore, Crescent Point continues to be one of the top stocks to buy due to its impressive dividend yield, the potential to receive special dividends, and the opportunity investors have to earn capital gains.

Crescent Point investors can earn massive returns on their investment

According to Crescent Point Energy stock’s guidance for 2023, it will produce between 138,000 and 142,000 of boe/d. Furthermore, management expects that at an average of $80 WTI oil, it will earn $1.3 billion of excess cash flow after spending roughly $1 billion on capital expenditures.

That means in addition to the roughly $200 million of cash it will return to investors from the base dividend, Crescent Point should have another $1 billion of cash at its disposal to buyback shares or pay a special dividend.

That goes to show not only how impressive Crescent Point’s operations are but also how affordably the energy stock is priced. Already its dividend has a yield of more than 4.3%.

So if you’re interested in increasing your exposure to energy stocks in 2023, there’s no doubt that Crescent Point is one of the best investments you can make.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Energy Stocks

oil and natural gas
Energy Stocks

If I Could Buy Just 1 Canadian Energy Stock, This Would Be it

Freehold is a relatively low-risk energy stock, earns tonnes of cash flow, has major growth potential and pays a dividend…

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

3 Clean Energy Stocks for Plenty of Green Returns

These clean energy stocks may be down for now, but make no mistake. There is going to be a recovery…

Read more »

bulb idea thinking
Energy Stocks

3 Top Canadian Energy Stocks to Buy Right Now

Three Canadian energy stocks are strong buys right now amid falling oil prices and strong market headwinds.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Does a Dividend Yield of 4.5% Make Suncor Stock a Buy in 2023?

Suncor is among the largest energy stocks on the TSX. Is an attractive dividend yield enough to invest in Suncor…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

What’s Next for Whitecap Resources Stock?

Whitecap Resources has increased its quarterly dividend thrice in the last 15 months.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Energize Your Portfolio With This Canadian Gem

Here's why Suncor (TSX:SU) remains a top energy stock that long-term investors may want to consider, as commodity prices fluctuate.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Energy Stocks

2 Unjustifiably Cheap Dividend Stocks in Canada

Given their cheaper valuation and high dividend yields, these two Canadian stocks are an excellent buy for income-seeking investors.

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

3 TSX Energy Stocks to Buy If Oil Moves Higher

Top TSX energy stocks to buy on current weakness.

Read more »