CPG - Crescent Point Energy: Earnings Are Still Cleaning Up

2024-05-12 21:32:56 ET

Summary

• Crescent Point Energy has shifted its management strategy from acquisitions to long-term growth and income.
• The company announced a C$600 million sale combined with a roughly C$500 million impairment charge.
• Portfolio optimization will gradually decline as no more acquisitions are planned.
• First quarter cash flow held up rather well despite the lower prices received for production sold.
• Crescent Point Energy will change its name to Veren along with a new symbol as shown sometime around May 15.

(Note the company name change to Veren (VRN) on or around May 15, 2024)

The previous article on Crescent Point Energy ( CPG ) (CPG:CA) noted that the management strategy had changed from an acquisition strategy to increase cash flow and profitability (while decreasing the debt ratio) to one of a long-term growth and income strategy. That strategy still appears to be intact. But a disposal of noncore operations was announced for C$600 million and an impairment was taken for these assets as well. That made for a lot of adjustments to earnings and cash flow. Portfolio optimization will gradually decline now that no more acquisitions are in the picture. But it will take some time (probably a year) and some patience. In the meantime, the strong buy outlook appears in place for this former zombie corporation that now has generous cash flow prospects.

Earnings Adjustments

I think one of the most frustrating things for readers is that companies make acquisitions and then report losses, as is the case here. Yet, the acquisitions were supposed to improve the situation....

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