I am not receiving compensation for it (other than from Seeking Alpha). Naturally the company will spend "first call" capital money on the highest margin area. Sign up here for a free two-week trial. That change as well as the continuing speed of that change will likely determine the company performance during the next downturn. I am a high school teacher for a decade. But the evaluation of that ability by any investor considering an investment in this entity will be crucial as to the viability of the investment proposal. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. I wrote this article myself, and it expresses my own opinions. The high oil percentage of production allows an almost "guaranteed improvement" although the recent price increases of other products certainly "help the cause along.". This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. That should happen without any extraordinary actions of management. So, there was an unexpected benefit that probably made Eagle Ford operations more profitable during the peak of the last business cycle. That is a huge advantage over many other companies that offer common stock (with potential capital gains due in the year the deal closes). I am not receiving compensation for it (other than from Seeking Alpha). (Note: This article was in the newsletter May 19, 2022, and has been updated as appropriate). Smaller brethren can often add a rig or sometimes half a rig and show tremendous growth from a smaller established production base. Interested? Management has decreased the debt ratio to cash flow to 1.0. Crescent Point management has spent the last few years materially changing the company.

Evidently, that is not completely the case as management added some hedges with considerably better pricing.

The low debt allows management to shut-in any unprofitable production while waiting for the next pricing recovery. This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. Production growth will allow for a far superior cash flow stream, even if commodity prices drop significantly from current levels. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Investors should be expecting steady revisions throughout the fiscal year as opportunistic acquisitions are made (and maybe an occasional sale). The current environment is likely to offer management an excellent opportunity to reduce operating costs. What is left out of the discussion is that there needs to be enough production at that wonderful netback to enable a decent return on investment and return on capital. The last deal involving the Unita Basin acquisition is looking very good because prices have risen considerably above the assumptions used for the acquisition. GAAP accounting therefore requires a noncash value adjustment of those hedges every reporting period. Is this happening to you frequently? Is this happening to you frequently? I have a high school teaching credential and an MA in Math Education. That is good news for an industry that has managed to surmount several challenging downturns. But the real test of many of these acquisitions will be the performance of the assets during the next industry downturn. Many companies in this industry are keeping dividends at a low percentage of cash flow so that the dividend can be maintained during the next inevitable cyclical downturn. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. Accounts Receivable alone soaked up a fair amount of cash generated in the first quarter because commodity prices rose. Management had a plan that was rudely interrupted first by the OPEC pricing war and then by the coronavirus demand destruction. But that dividend is also going to be a very conservative part of cash flow for the foreseeable future. Cash flow before changes in operating accounts should remain at least $35 million in each of the quarters. I have no business relationship with any company whose stock is mentioned in this article. Management is running the company in a very conservative fashion. Interested? There is a fear of great ratios without the necessary cash to pay investors. I analyze oil and gas companies like Crescent Energy and related companies in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space. Losses are far worse when the discount often expands during a cyclical downturn to produce an overall lower level of profitability than is the case with light oil. But an acquisition, if done correctly, often changes the profitability mix of the acquiring company for a few years to enable more per share growth than peers of a similar size. Management experience should reduce the risk of fast growth and the chance of failure. The only thing that can happen is too many profits were stated during the boom times. That sort of makes the guidance given during the first quarter earnings press release, conference call, and earnings slide presentation somewhat transitory in nature. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. Therefore, that debt ratio is likely to go a lot lower so that it remains conservative at considerably lower prices. That points to a far above average management. The second quarter pricing for all oil and gas companies, including Ring Energy (NYSE:REI), was even better than the first quarter. This increases the chances of financial outperformance during the next industry downturn. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Newer production tends to be a lot more profitable than older production. I have no business relationship with any company whose stock is mentioned in this article. But for Oil & Gas Value Research members, they get it first and they get analysis on some companies that is not published on the free site. The market is waiting for that "projected profitability" to show on the quarterly results. Not many managements have that option. Current prices have the debt ratios well within allowable territory. Now let us see what the future holds. Therefore, they are very likely to benefit the common investors. That company itself filed bankruptcy with too much debt. I am not receiving compensation for it (other than from Seeking Alpha). (Note: This article appeared in the newsletter on May 10, 2022, and has been updated as needed with current information.). The growth in production and cash flow should go a long way towards resolving debt ratio issues that plague some companies. This was probably to be expected as the company grew and was able to acquire larger deals.

If you have an ad-blocker enabled you may be blocked from proceeding. As the debt gets paid down, less money will be needed for that purpose to automatically increase the amount available to return to shareholders. A large company like this has a fairly diversified amount of production with an emphasis on light oil and condensate. But management is not going "all the way" to opportunistic hedging. So many companies focus on netback. The newly merged company supposedly has the scale to acquire larger properties than the predecessor companies had separately. Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research, Occassionally write articles on Tag Oil for the Panick High Yield Report, https://seekingalpha.com/account/research/subscribe?slug=richard-lejeune. I have no business relationship with any company whose stock is mentioned in this article. Therefore, the logistics challenges of growing fast can be very formidable. group has long had a history of buying cheap and selling dear. That often means switching strategies. The acquisition provided significant exposure to the premium condensate market that exists in Canada. It also has an acquisition that will likely continue to provide a positive earnings influence that is not available to many of its peers of a similar size. That kind of revaluation is going to be favorable for long term shareholders. The investor is warned about this guidance by the word "initial". I am not receiving compensation for it (other than from Seeking Alpha). The industry has largely moved past that several years back. But the ability to generate some very good cash flow should remain. (Crescent Energy First Quarter 2022, Earnings Conference Call Slides), (Crescent Energy Press Release February 2022.). Management has some drilling opportunities to go with the original older production purchases. Sign up here for a free two-week trial. It appears management is willing to bear some additional risk. I have a high school teaching credential and an MA in Math Education. Management announced a continuing rig program that should allow for production growth. I am a high school teacher for a decade. Is this happening to you frequently? That means this acquisition will payback faster than expected. This management has been digging the company from a debt hole for some years. In the meantime, there are a lot of deals for stockholder gains to be made. If you have an ad-blocker enabled you may be blocked from proceeding.

That is not an option for this company. The backers of this company generally get involved to make a lot of money or they do not get involved. Every single company in the industry will benefit from rising commodity prices. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications. It also has an acquisition that will likely continue to provide a positive earnings influence that is not available to many of its peers of a similar size. Whether or not you as a potential investor want to do the same is up to you. The outlook at Ring Energy is very good for the first time in a few years. The way that management gets deals is because they occupy a niche where sellers far outnumber demand for the "product". As those results become apparent, Mr. Market may look at the company in a far more positive light than has been the case in the past. Now conditions are allowing a gradual return to the original plan. Most wells drilled in the current environment pay back within months. The company is getting "back on track" with the original plan to convert to an operating company with an optimal amount of production. Get analysis on under followed Oil & Gas companies with an edge. These downturns will happen a lot faster (meaning they will not last long) because production declines quickly in the unconventional business that now dominates the industry. So many do not realize that the market determines profitability of cyclical companies by their performance throughout the business cycle. Investors have a chance to participate right alongside some very experienced "big boys" in the deal making world. I am a high school teacher for a decade. That means that initial profits from this acquisition should run above budget as long as commodity prices remain stronger than the assumptions used for the acquisition. This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. I wrote this article myself, and it expresses my own opinions. The fourth quarter earnings report has a huge mark-to-market" hedging adjustment that really clouds the operating results. Management will pursue debt repayment and production growth to decrease key debt ratios at lower commodity prices. Please disable your ad-blocker and refresh. The good news for shareholders is that the market will notice the unexpected debt progress sooner rather than later. Lower debt levels also argue for an enterprise valuation increase. That outperformance is likely to continue well into the future. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. That can be a lot riskier because management does not hedge unless they think they need to. Growth will then come from bargain acquisitions that are accretive as well as organic growth. Kaybob Duvernay Acquisition Benefits (Crescent Point Energy Second Quarter 2022, Earnings Conference Call Slides). Accounts receivable soaked up a fair amount of cash flow because sales prices climbed in the first quarter. There are always risks to growth by acquisitions in that the acquisitions fail to meet desired goals or management pays too much for the acquisition. This is not your typical company in that management will be growing through deals. The good news is the current prices also allow for that full time rig as well. Occassionally write articles for Rida Morwa''s High Dividend Opportunities https://seekingalpha.com/author/rida-morwa/research, Occassionally write articles on Tag Oil for the Panick High Yield Report, https://seekingalpha.com/account/research/subscribe?slug=richard-lejeune. That left management with insufficient cash flow compared to the debt, with an asset story that was now meaningless to lenders. The acquisition should lead to above-average profitability gains throughout the business cycle. If you have an ad-blocker enabled you may be blocked from proceeding. Therefore, the appearance of the latest hedges is a welcome sight. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications. Before that I was an analyst (operations and financial) and for a short time a Controller I have a B.S. In the meantime, the slide above remains unchanged (and for good reason as this industry is very volatile). Then again, the whole reason for acquiring assets is to improve performance. Interested? I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. At that point, the well is either shut-in until a cyclical recovery ensures better commodity prices, or the well is abandoned because there is no hope of profitability. Investors have a chance to participate right alongside some very experienced "big boys" in the deal making world. The problem with a lot of companies that filed was the market often focused on the production decline rate as well as the lack of cash flow in the history. However, this management is used to building and selling companies. That also means as a public shareholder you do not get to elect the directors (and hence really have no say in the company operations). Here, the debt levels combined with the very profitable wells will allow management to "drill its way out" of the whole situation. The company intends to grow through cheap acquisitions rather than solely organically. That consideration alone may allow the company at some point to entertain more debt to get that production to the minimum optimal amount that is cost-effective. In the current environment, the banks may allow a second rig, as was originally planned, to operate. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland. This management is likely to continue the opportunistic acquisition strategy that was initiated before the business combination. This has been going on for as long as I can remember and it appears to be continuing for the foreseeable future. The stock price will respond to steady progress. I am not receiving compensation for it (other than from Seeking Alpha). So, that means earnings and cash flow will jump in the second quarter when compared to the first quarter. This is a company that probably needs a year of the current prices to really get itself back on track. Many of these properties were neglected. That would allow a much faster monetization of anticipated profits from the Northwest properties. In the meantime, management will use the latest techniques and future technology improvements to continue to lower costs. with an emphasis in Accounting and an MBA (for which I studied Finance, Economics, and Management) I passed the CPA exam on the first try and am a retired CPA in the state of Maryland. Right now, there is more production exposed to commodity prices than has been the case for some time. I am a high school teacher for a decade. The reason that may happen is that the annualized first quarter cash flow is in the $140 million range. But management has to also demonstrate that there is enough free cash flow to repay the debt while growing production and maintaining operations properly. I wrote this article myself, and it expresses my own opinions. There is additional cost reduction progress in the form of continuing technology advances throughout the industry. Right now, though, I like the chances of management to succeed with this acquisition. That makes the change in cash flow real important. I wrote this article myself, and it expresses my own opinions. Fast growth has its own risks. Therefore, expect Mr. Market to take his time assigning a decent value to the assets.

Despite the fact that the debt acquired to purchase the Northwest properties was originally seen as conservative by many, the unplanned challenges of fiscal year 2020 changed that overnight. The preferred stock elects the board of directors. I have a high school teaching credential and an MA in Math Education. In the meantime, management is able to spend the generous cash flow to optimize acquired operations while drilling new production to increase the performance of the properties acquired. Get analysis on under followed Oil & Gas companies with an edge. Because management continues to shop for bargains, there is likely to be more acquisitions that will materially change guidance during the current fiscal year. That will leave management a lot of options to grow this company for the benefit of shareholders. Generally, a faster payback raises the profitability of the acquisition. The corporate structure is set up to delay the tax consequences of any deal for selling shareholders. But for Oil & Gas Value Research members, they get it first and they get analysis on some companies that is not published on the free site. Larger companies like Crescent Point do not generally appreciate as much as do smaller companies. These assets represent the majority of the old EP Energy (OTCPK:EPEG) company. Probably the largest progress by far is the growth in cash flow before the changes in operating assets and liabilities. So, when this company sells itself, investors will have a good idea that a market top is somewhere in the neighborhood time period. Investors are advised to review all company documents, and press releases to see if the company fits their own investment qualifications. I personally think the Eagle Ford may yet come out on top at the top of the business cycle one more time. That happens to be just fine with this group because they are not shy about naming a bargain price. Such an event would be corrected with an impairment charge at the industry cyclical bottom. Consistent hedging is generally looked at by the market as a zero-sum game. I/we have a beneficial long position in the shares of CPG either through stock ownership, options, or other derivatives. I analyze oil and gas companies like Ring Energy and related companies in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space. Management sees a lot of potential bargains in the market. There is always a possibility that prices could drop before shareholders see the benefits of new operational techniques or that management was too confident. Please disable your ad-blocker and refresh. Please disable your ad-blocker and refresh. ) The reason is that the established production base is much larger. And hello cash flow! That gives this company a little more exposure than is the case for many Canadian companies as well as access to the United States debt market. That few years though has lowered costs considerably to make previously uneconomical acreage economic while moving other acreage into Tier 1 territory. This is really the first business cycle where the results can be seen. I wrote this article myself, and it expresses my own opinions. Even though geology may usually give the advantage to Permian operators, there is nothing like a good old-fashioned bottleneck in the midstream capacity to completely obliterate that advantage.

The specific part of this is the Class B and OpCo units. The company is likely to grow quickly. They also wisely initiated a share repurchase program that can be discontinued or suspended during times of weak commodity prices. For those where this type of investment is their "cup of tea", then it's time to consider getting in and fastening their seatbelts for a very exciting ride. Right now, it looks like that may happen again. made. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. This management, through production increases and repaying debt, has a goal to have reasonable ratios at considerably lower prices. Investors can bet that this management will be watching positive cash flow very closely. There is a lot of unconventional and secondary recovery companies with wonderful netbacks both historically and currently that do not have enough production to produce a viable amount of cash flow and profits. They are not the only ones either, as a lot of development stage and companies converting to operating stage were caught in the consequences of fiscal year 2020 challenges. Disclosure: I/we have a beneficial long position in the shares of CPG either through stock ownership, options, or other derivatives. Organic growth is somewhat down the priority list.



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