Crescent Point Energy Corporation - CPG-T

Discuss your favourite picks, broker, and trading or investment style.
User avatar
fdfinancial
Contributor
Contributor
Posts: 36
Joined: 03 Sep 2011 23:08

Re: Crescent Point Energy Corporation - CPG-T

Post by fdfinancial »

TD Waterhouse must have noticed their "mistake". They cancelled my $109.32 dividend that they had given me on the morning of the 15th, and the next day, gave me a dividend of $107.18, which I was able to DRIP two shares out of. Guess I got all excited for nothing.... :shock:
Taggart
Veteran Contributor
Veteran Contributor
Posts: 6893
Joined: 05 Dec 2005 07:34

Re: Crescent Point Energy Corporation - CPG-T

Post by Taggart »

Is Crescent Point Energy’s dividend safe?

JOHN HEINZL - INVESTMENT REPORTER
The Globe and Mail
Published Friday, Dec. 05 2014, 4:58 PM EST
Last updated Friday, Dec. 05 2014, 5:52 PM EST

-----------------------------

Disclosure: I do not own shares in this company.
nisser
Veteran Contributor
Veteran Contributor
Posts: 2079
Joined: 11 Nov 2007 21:24

Re: Crescent Point Energy Corporation - CPG-T

Post by nisser »

That's interesting because COS's dividend made up 75% of the operating cash flow in the last 12 months while Crescent's is roughly 65%. This was prior to the cut and they deemed the cutting to be necessary.

Sounds like they are thinking their short-term outlook to be much rosier than that of COS.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Crescent Point Energy Corporation - CPG-T

Post by AltaRed »

nisser wrote:Sounds like they are thinking their short-term outlook to be much rosier than that of COS.
Because CPG has a hedge on a good part of their 2015 production at prices over $90. COS does not.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Spidey
Veteran Contributor
Veteran Contributor
Posts: 4556
Joined: 11 Jan 2009 19:55
Location: Ottawa

Re: Crescent Point Energy Corporation - CPG-T

Post by Spidey »

I've been looking seriously at CPG - P/B, debt levels, P/CF, quality of assets, and a dividend of almost 10% all look pretty good. Most analysts seem to love this stock. However, the dividend payout ratio at ~ 305% is troubling. I understand that payout ratios for most oil companies are strained under the current market conditions but CPG is still among the highest. As I understand it, CPG can manage the dividend because so many investors take the dividend in shares rather than cash. It never seems to be considered that significant DRIP investors might sell their shares to those who prefer to collect the dividend in cash.

That all being said, I sense that this is one is bottoming and the other positive factors may warrant risking a little "play money".
If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle
User avatar
scomac
Veteran Contributor
Veteran Contributor
Posts: 7788
Joined: 19 Feb 2005 09:47
Location: The Gateway to Wine Country

Re: Crescent Point Energy Corporation - CPG-T

Post by scomac »

It's alright if you don't mind dilution. The share count has more than doubled in the last 5 years. So, while the company has been growing; the individual investor's share, not so much... :x
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

AltaRed wrote:
nisser wrote:Sounds like they are thinking their short-term outlook to be much rosier than that of COS.
Because CPG has a hedge on a good part of their 2015 production at prices over $90. COS does not.
Maybe you can clarify something for me. When a company like CPG hedges their production at $93, no doubt they gain if prices drop as they have. But if they gain, someone has to lose. Who is it that loses?
User avatar
Peculiar_Investor
Administrator
Administrator
Posts: 13271
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Re: Crescent Point Energy Corporation - CPG-T

Post by Peculiar_Investor »

In the simple case, one could make the argument that hedging is a risk control mechanism for both sides of the agreement. Both sides have their reasons for hedging, most likely revolving around cost/price certainty as part of their business planning process. After that, it gets complicated. Google hedge and you'll find lots of strategies. Here's the Wikipedia link, Hedge.

I'll take a stab at my layman's view. Airlines typically hedge this fuel costs going forward for cost certainty reasons. If they hedge at a higher price than where market prices end up falling, is it the airline or the passengers that lose? But an airline passenger purchases a ticket up a year out, so on some level they are also engaging in hedging on the price of oil. The same logic probably applies to any industry that has fuel costs, railroads, farmers, cruise ships, ... Since we don't know the 2015 market price of oil and there are many pass along impacts, I'd say we cannot declare winners or losers.

At the same time there are many other players in the futures market, hedge funds and oil speculators come to mind. It may be a bit easier the winners and losers on 2015 oil prices for these players.
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Crescent Point Energy Corporation - CPG-T

Post by AltaRed »

Springbok wrote:Maybe you can clarify something for me. When a company like CPG hedges their production at $93, no doubt they gain if prices drop as they have. But if they gain, someone has to lose. Who is it that loses?
The counterparty loses. As P_I suggested, the counterparty could be any number of folk but in all cases those folk believe the commodity prices either would be going higher than the hedged price, or at least not so much lower that the net proceeds they otherwise sold the hedge for, to make a profit. Hedges do cost money and the higher the hedged price, the more the company has paid for that.

I detest CPG as an investment opportunity for 3 reasons: 1) dilution of shareholder equity as Scomac pointed out, 2) continual secondary offerings to pay for acquisitions, and 3) lack of earnings though it can be argued earnings will eventually show up once the company matures more. Regarding 3), CPG continues to act like the old income trust that it was and the question is whether they are really adding accretive value with these acquisitions or they are not. It seems most money managers that hold CPG believe there is accretive value. We will not know for quite some time until and if they start reporting robust earnings, with its attendant metrics like P/E, ROE, Dividends/Earnings, etc. CPG's stock price has not gone anywhere for a long time (partly due to the continual secondary stock offerings) and all people have been really getting for their investment is the dividend yield.

I do not buy companies that have considerable shareholder dilution, with the occasional exception of a secondary offering for a strategic acqusition that one would expect to be a normal business opportunity practiced from time to time by most businesses. I especially do not like companies that issue new shares to pay for DRIPs rather than buy back existing float to maintain shareholder equity. Paying for my own dividend with dilution does not add value.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

Springbok wrote: Maybe you can clarify something for me. When a company like CPG hedges their production at $93, no doubt they gain if prices drop as they have. But if they gain, someone has to lose. Who is it that loses?
This article answers my question in part. And the answer is something to be concerned about. It could be the big banks that are the losers, or perhaps as in the case of the subprime mortgage crisis, risk transferred to investor in complex financial products.

http://etfdailynews.com/2014/12/04/plum ... vatives/2/

Note to moderator - perhaps the last 3 or 4 posts and subsequent discussion should be transferred to the oil thread?
Last edited by Springbok on 06 Dec 2014 13:49, edited 2 times in total.
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

AltaRed wrote: The counterparty loses. As P_I suggested, the counterparty could be any number of folk but in all cases those folk believe the commodity prices either would be going higher than the hedged price, or at least not so much lower that the net proceeds they otherwise sold the hedge for, to make a profit. Hedges do cost money and the higher the hedged price, the more the company has paid for that.
I understand that part. What my question asked, was - who are those counterparties? It would be good to know so that we don't invest in them. As the artice I linked above mentions, the big US banks could again be at risk. And perhaps our Canadian banks too? Or perhaps those buying complex financial products from those banks - again.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Crescent Point Energy Corporation - CPG-T

Post by AltaRed »

Try googling 'who are the counterparties to oil price hedges' and you will find a wide range of links you can indulge in.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
nisser
Veteran Contributor
Veteran Contributor
Posts: 2079
Joined: 11 Nov 2007 21:24

Re: Crescent Point Energy Corporation - CPG-T

Post by nisser »

But that's not exactly fair to the "counterparties" because often hedges work in the opposite favor. How attractive was that 90$ hedge looking when oil was about 100$+?
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Crescent Point Energy Corporation - CPG-T

Post by AltaRed »

nisser wrote:But that's not exactly fair to the "counterparties" because often hedges work in the opposite favor. How attractive was that 90$ hedge looking when oil was about 100$+?
Agreed. In that situation, that is a win-win for the oil company and the counterparty. The oil company gets certainty of cash flow to fund its capital program and pay its dividends and the counterparty makes money two ways: 1) the price of the hedge, and 2) the difference in hedged and actual sales prices.

Counterparties likely do not get into these contracts without certain risk management policies themselves. They may, in fact, lay off some of that risk to various re-insurance companies to spread the risk. Just like the junk paper crisis of 2008/2009 except the hope here may be that insuring the hedges of a wide variety of commodities will not be result in the planets lining up in a bad way, e.g. wheat and corn will not be down at the same time as oil and copper.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

AltaRed wrote:Try googling 'who are the counterparties to oil price hedges' and you will find a wide range of links you can indulge in.
I tried that, and the results don't answer the question. Try it for yourself.

I asked a serious question and was hoping for some serious insight.

It seems that Canadian banks may also be affected.

http://www.bnn.ca/News/2013/12/19/Canad ... lysis.aspx

But to what degree? And should we be lightening up on banks. Many guests on BNN seemed to be doing just that.
$seeker
Contributor
Contributor
Posts: 222
Joined: 16 Aug 2006 07:25

Re: Crescent Point Energy Corporation - CPG-T

Post by $seeker »

Springbok wrote:
AltaRed wrote:
nisser wrote:Who is it that loses?
I was wondering if a company like Irving Oil would be a good size hedger.
They have a large client base for home oil delivery and gas stations etc.
This year after the price of WTI started to fall they sent out a letter to this homeowner with the very kind offer to lock in the price of oil for the whole heating season at just a few percent more that todays prices so that we would not have to worry about changing price of oil.
Have never received this offer ever and especially in a rising price environment that is the seasonal heating period.. I could be wrong but I think this year Irving locked in expecting higher prices :?:

They are smart operators so my take is oil prices are lower than they could have predicted.
Multiply this by numerous such companies".........
Sensei
Veteran Contributor
Veteran Contributor
Posts: 1922
Joined: 07 Mar 2008 21:22
Location: Tokyo

Re: Crescent Point Energy Corporation - CPG-T

Post by Sensei »

Hi,

I have found a lot of things out about CPG since I bought it several years ago as a rather callow investor. Almost all of them are listed above. The most annoying to me, as pointed out by Alta, is they keep issuing new shares. Also, on the surface of it, the acquire - manage risk - exploit and develop model seems like there is a always a disaster waiting around the corner and who knows maybe this is it.

On the other hand, there are at least two things I like about the company compared to companies like COS. Their area of operation is better diversified. They've been very consistent dividend payers since conversion and before. I might also add that I think they've earned a reputation for doing what they do well.

Continue to hold and added recently.
Cheers

"A dividend being paid today is always a positive return." Josh Peters, Morningstar
User avatar
Spidey
Veteran Contributor
Veteran Contributor
Posts: 4556
Joined: 11 Jan 2009 19:55
Location: Ottawa

Re: Crescent Point Energy Corporation - CPG-T

Post by Spidey »

I have the same concerns as those listed by previous posters and that's what has me "on the fence". However, several analysts whom I've seen interviewed, who've met with management of CPG, seem impressed. Here are a couple of quotes from "Stockchase".
A well-managed company. They have a good discipline of maintaining capital frugalness. They pay dividends and they make acquisitions and they invest in their own properties. The issue here is, how long will oil prices stay low. He doesn’t think this is a long-term bubble that makes sense. - Lyle Stein

A lot of people and the market are forgetting that this company have really good hedges on. 33% is hedged at $93 for next year, about 25% hedged in the $90’s for 2016 and 15% hedged in the $90’s in 2017. Has almost a 10% yield now. His numbers show that oil would have to stay in the low $50’s before the dividend is in jeopardy. 9.5% dividend yield, which he thinks is safe. -Bruce Campbell
The share dilution model has it's annoying side but the other side of the coin is that they've apparently accumulated top-notch developments with minimal debt. Their debt/equity level is quite a bit lower than many other producers including COS. In the event of a crisis, debt still has to be paid - shareholders do not.

Anybody out there considering taking the plunge with CPG?
If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle
User avatar
Mike Schimek
Veteran Contributor
Veteran Contributor
Posts: 2698
Joined: 04 Nov 2007 18:25
Location: Montreal, Quebec

Re: Crescent Point Energy Corporation - CPG-T

Post by Mike Schimek »

http://www.financialwisdomforum.org/for ... mit=Search

A trip down memory lane -) the comments above appear to remain valid

I've followed Crescent Point for a while now, as an item of fascination of how the market values things. I also find it fascinating to look back over the years at how I felt about a stock and then how things turn out after. So here's the past. I'll comment on the current value which will give an opinion on the future of Crescent Point relative to its peers.

From my Feb 10th numbers, 2013;
When I owned Imperial Oil at the start of 2013, I ran comparables using this method on some companies, on Feb 10, 2013, this is what they looked like, the share price and the calculated annualized return based on the method;

Imperial oil, SP 42.96, return 9.92%
Suncor SP 32.19, return 10.6%
Husky SP 31.02, return 2.3%
Canadian Oil Sands, SP 21.31, return 5.78%
Exxon Mobil, SP 88.61, return 5.75%
Crescent Point, SP 38.98, return -3.95%

Imperial Oil was preferred at that time, even though Suncor was a bit better, because of preference of Imperial's historical capital investment decisions
Current:
Imperial Oil 52.28, gain of 21.7%
Suncor 35.75, gain of 11.1%
Crescent point 26.69 , loss of 31.5% (plus high div yield though, so down maybe 17% +/-)

The stock that had the worst % did very poorly (Crescent Point). The one that did best was the top pick, Imperial Oil.

A couple side notes: Imperial, I didn't own any because other things I own are better value, but my mom did, and I told her to sell just a couple days ago. I feel it should have declined more than it has recently, and I also feel that anything oil sands is very questionable at this time, quite possibly forever. Also, I just sold my Canadian oil sands at a huge loss, disgusted with their operating cost and other cost increases in their 2015 budget

Crescent Point now;

1- Market cap is 11.85 billion at 26.69 per share
2- shareholder equity is 10.1 billion
3- based off Q3, excluding things like exchange rate gains and derivatives etc, their cash flow was 538 mil, annualized 2152 mil
4- they have 14906 mil of PPE, depreciating at 1752 mil per year, so it will last 8.5 years
5- so for 8.5 years they will generate an annualized cash flow of 2152 mil, = 18.3 bil total
6- so at the end of 8.5 years, the equity of 10.1 bil becomes: 10.1 bil + 18.3 bil of cash flow generated minus 14.9 bil of PPE all used up = 13.5 bil.
7- In summary, you are paying 11.85 billion for something that will be worth 13.5 billion in 8.5 years.

That works out to a return of 14% over 8.5 years, or 1.64% per year.

Obviously people can poke a ton of holes into the simplified methodology above and it's far from perfect, but I think it's been more useful to me than anything analysts use.

It's obvious that we have to think about the price of oil. In the above Q3, Crescent point got $90 per barrel for its oil. Needless to say, with oil trading at $70, Crescent Point's return as an investment is going to be negative. If the go forward price of oil stabilizes at some point at $75-$80 the returns will still be negative.

So, in summary, purchasing this stock would be a poor investment decision.


With regards to analyst opinions:

Back in Feb 2013, when I did my original analysis, analyst opinions were pretty much the same. Sell imperial oil, buy crescent point. From then to today, Imperial, which they said sell (consensus was "hold", which means sell) gained 21.7% while Crescent Point, which they said buy... lost 17%. That's a 38% difference in less than 2 years.
Research until your head hurts then scream Banzai!!! and charge fearlessly to victory or death!
lacrosse905
Contributor
Contributor
Posts: 242
Joined: 05 May 2014 20:59

Re: Crescent Point Energy Corporation - CPG-T

Post by lacrosse905 »

Sold CPG on Friday for cap loss in non reg account. Shares were bought in the range of 36 up to 42, Sold @26.52....they did go up to $27.50 during the day, could have waited, but who knows..won't buy back in.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: Crescent Point Energy Corporation - CPG-T

Post by SQRT »

Springbok wrote:And perhaps our Canadian banks too? Or perhaps those buying complex financial products from those banks - again.

Our banks do not take speculative positions in commodities.
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

SQRT wrote:
Springbok wrote:And perhaps our Canadian banks too? Or perhaps those buying complex financial products from those banks - again.
Our banks do not take speculative positions in commodities.
The link I provided upthread (and in part quoted below) does confirm that. They don't get into physical trading of commodities. But what I was asking about, was who the counterparties of hedging were. And it seems our banks are involved there.
While many Wall Street banks embraced physical energy trading, Canadian banks have so far shied away.

CIBC, Scotiabank, TD, and RBC do trade physical natural gas, a homogenous product that is easy to value. As well, BMO is in the middle of an approval process to trade physical natural gas, and the bank expects the process to be completed early in 2014.

None of the banks are involved in physical crude trading, however, which would entail greater investment in logistics and storage, Calgary market players said.
<snip>
Instead, the Canadians concentrate on trading financials - crude derivatives contracts, usually based on the U.S. West Texas Intermediate benchmark - that enable clients to hedge their exposure to price swings in oil markets.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: Crescent Point Energy Corporation - CPG-T

Post by SQRT »

You must keep in mind that trading a commodity is not the same as speculating in a commodity. They will often act as agents for their customers and take relatively small positions for short periods of time to facilitate trades. These are all well controlled by the banks and closely monitored by OSFI. Risk ensure is nominal.
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Re: Crescent Point Energy Corporation - CPG-T

Post by Springbok »

SQRT wrote:You must keep in mind that trading a commodity is not the same as speculating in a commodity. They will often act as agents for their customers and take relatively small positions for short periods of time to facilitate trades. These are all well controlled by the banks and closely monitored by OSFI. Risk ensure is nominal.
The first US oriented article I linked above seemed to think banks could be at risk, because of hedging, not speculation.

When banks offload hedging risk, how do they do that? I keep thinking of the sub-prime mortgages where the banks repackaged the risk and sold it to unsuspecting investors.

With oil where it is now, someone must be on losing end in quite a big way. If not the banks, who would that be?
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: Crescent Point Energy Corporation - CPG-T

Post by SQRT »

Springbok wrote:
SQRT wrote:You must keep in mind that trading a commodity is not the same as speculating in a commodity. They will often act as agents for their customers and take relatively small positions for short periods of time to facilitate trades. These are all well controlled by the banks and closely monitored by OSFI. Risk ensure is nominal.


With oil where it is now, someone must be on losing end in quite a big way. If not the banks, who would that be?
Could be speculators (like hedge funds) or any party that naturally uses crude oil, think refineries, or utilities. For anyone who thinks a price is going down, there is someone else who thinks it is going up. That what markets are all about. CDN banks do not take a position in these markets, rather they facilitate others.
Post Reply