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Crescent Point, Management Is Finally Listening.

|Includes: Crescent Point Energy Corp (CPG), WTI


New CEO as Scott Saxberg departs, Craig Bryska steps up.

Announced a non-core debt reducing asset sale in the Williston Basin.

Bank of Montreal rewards Crescent Point with a $15 price target.

It took an angry group of activist investors to finally make Crescent Point's management realize that long demanded shareholder frustration had finally run out of time.  The shareprice was trading at a fraction of what it once had, with plenty of dilution and increased debt between 2014 and 2018.  The company under the leadership of former CEO Scott Saxberg had continued to grow during the long-lasting oil glut, despite crude crashing to as low as $30.  Shareholders in both Canada & United States sought shareholder value over growth "at any cost" model.  It was a never ending cycle of acquisitions which some of the most cynical investors went as far to dub as "Ponzi" like.  

While the company's board, including CEO Mr. Scott Saxberg, survived the attempted Cation Capitol Inc-led revolt, it was within a hairs reach of overthrow and it didn't take long for the company to finally act on long demanded changes by a group of frustrated shareholders.  On May 29, Saxberg resigned and gave the keys to interim CEO Craig Bryska, who was also an insider.  If I had my wish, I would have preferred an outsider candidate, perhaps someone like Raging River CEO Neil Roszwell, who subsequently shortly after Saxberg's resignation, went on to sell-off Raging River to Baytex in an all-out stock deal which was well detested by the market as it diluted shareholders and flash crashed both shareprices equally. 

With around 180,000 boe/d of production, 90%-weighted to crude oil in a lower cost non-oilsands part of Canada, it is my opinion that Crescent Point holds tremendous potential as crude oil prices recover.  Over the past 4-years, Crescent Point has added 40,000 boe/d of new production, primarily in Southeastern Saskatchewan and done so during times of low costs.  While the low costs may have reflected poorly on Crescent Point's balance sheet during tough times, it is this authors opinion that such growth will be seen with glittering eyes as crude oil (WTI) hovers at $70/bbl with more upside to come. Saxberg made all the right moves, but at the wrong time.  

It is a common misconception of the ill-informed market to lump all Canadian producers together as one, selling under the brand of "Canadian oil" which is commonly thought of as Western Canadian Select.  Crescent Point suffers from the adverse image effecting WCS perception, despite being a predominant light oil producer, selling at much closer to WTI then embattled bitumen producers (who surprisingly have recovered much better then Southern Saskatchewan light-oil producers!)   Even the taboo perception of WCS-spreads is quickly fading as heavy oil imports to the US from Venezuela and Mexico rapidly decline, leaving Gulf Coast refiners extremely thirsty for the much despised "Canadian oil" known as WCS. 

This author believes that Crescent Point has the "maximum bearishness" already baked into the shareprice, even after today's large 5% jump as OPEC's meeting provided upside to the market, the stock remains near the 52-week low.  While not an indoctrinated believer of stock target prices, it was nonetheless encouraging to see Bank of Montreal place a whopping $15.00 target on Crescent Point this Friday;  that implies a potential for around 55% upside from current shareprice.  It was only last April 2018 that Crescent Point stock rose 43% before falling back down.  While not a small or medium cap stock by TSX definition, Crescent Point behaves very high beta.  Extreme volatility for the better or worse, though this author expects much better. 

Potentially never won anything, but I have recently increased my position in Crescent Point to a large one. I believe in the company and admire Scott Saxberg for his incredible accomplishments at building a top tier light oil producer in Saskatchewan and later Utah out of scratch while at the same time, recognizing the value in change and conceding to shareholders which should serve as prelude to a true recovery phase for the company.  As Crescent Point continues to trade at near 50% of its book valuation, I continue to see it as a once in a decades opportunity that may never come again.   

In conclusion, much of what happens to Crescent Point depends on the overall sentiment towards Canadian energy, global crude oil prices, spreads, pipeline politics, and even Donald Trump's Tweets; I believe the company has began and will continue to pursue rectifying the mistakes of the past years and rebuilding their reputation with shareholders.  I believe this is a company, a former stock market darling, that investors, both big and small, want to believe in again and I do sincerely believe that a redemption is not only possible, but coming soon;  even better, coming as crude oil looks like it seriously may take another jab at three figures, and yet, Crescent Point is trading at less then it was when crude oil was $30 (Thirty-Dollars!)

Disclosure: I am/we are long CPG.