This Canadian stock recently won a battle with an activist investor, but agreed to name a new CEO.
The company is in the midst of a turnaround plan that is designed to pare down debt and produce stronger results. In the latest quarter, the stock’s daily output was up and cash flow rose by 18%. In the meantime, the company continues to sustain a monthly dividend that yields 3.4%.
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CRESCENT POINT ENERGY (Toronto symbol CPG; www.crescentpointenergy.com) produces oil and natural gas in Western Canada. The company is now focused on its Bakken light oil development in southeastern Saskatchewan. Its output is 90% oil and 10% gas.
In May 2018, the company defeated a motion by Alberta-based activist investor Cation Capital to replace some of Crescent Point’s directors. Shareholders endorsed all of the company’s board nominees. Cation, owner of just 0.3% of the company’s shares, complained about Crescent Point’s poor performance and high executive pay.
Despite the defeat of Cation’s motion, the activist prompted Crescent Point to name a new chief executive. Yesterday Craig Bryska was named chief executive officer, replacing long-time CEO Scott Saxberg.
Energy stocks: Company able to pay down $390 million in debt in latest quarter
In the quarter ended June 30, 2018, Crescent Point’s daily output rose 3.5%, to an average 181,818 barrels of oil equivalent from 175,615 a year earlier. Higher oil prices pushed up cash flow per share by 18.2%, to $0.91 from $0.77.
Crescent Point stock is down along with many energy producers. As well, its long-term debt is $4.3 billion, or a high 88% of its market cap. The company declared its intention to reduce its debt by more than $1 billion by the end of 2019. Increased cash flow did let the company reduce its debt by over $390 million in the most recent quarter.
At the same time, the company is in the middle of a turnaround plan. The company announced that it would reduce its workforce by 17 per cent, which is expected to create annual savings of over $50 million,
It believes its turnaround initiatives—along with the selection of its new CEO—should generate better results and help the company achieved its debt reduction goals.
Crescent Point pays a monthly dividend of $0.03. The annualized rate of $0.36 currently yields 3.4%.
The stock trades at just 2.2 times the company’s forecast 2018 cash flow per share of $3.54.
Recommendation in Canadian Wealth Advisor: Crescent Point Energy is a buy.
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