I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. A large company like this has a fairly diversified amount of production with an emphasis on light oil and condensate. Please. Crescent Energy Financial Conservatism Description (Crescent Energy Fourth Quarter 2021, Earnings Slide Presentation). Generally, a faster payback raises the profitability of the acquisition. I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. Hence, this is an unusually profitable opportunity to take advantage of while it lasts. 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. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The result is a very valuable company going forward with a stock price that is likely to match. Ordinary maintenance was delayed due to bankruptcy proceedings or seller financial distress. The result will be a far different company moving forward than was the debt laden company of years past. I am a high school teacher for a decade. ), was even better than the first quarter.

Not many of these kinds of companies are public.

I have a high school teaching credential and an MA in Math Education. Much of the market is still fixated upon the negative cash flow days that are very unlikely to return to the industry. 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. (Crescent Energy First Quarter 2022, Earnings Conference Call Slides), (Crescent Energy Press Release February 2022.). The company is likely to grow quickly. Sign up here for a free two-week trial. I/we have a beneficial long position in the shares of REI either through stock ownership, options, or other derivatives. Please disable your ad-blocker and refresh. So many do not realize that the market determines profitability of cyclical companies by their performance throughout the business cycle. Crescent Energy Explanation Of Management Choice Of Acquisition Strategy (Crescent Energy Fourth Quarter 2021, Earnings Conference Call Slides). The management does have a decent history in the oil and gas business. That did not happen in the Eagle Ford where the oil was generally sold at a premium to the corresponding benchmark. Current prices have the debt ratios well within allowable territory. It is for investors that believe in this management continuing to grow the company through deals as well as organic growth.

That turns out to be the acquisition.

Therefore, the appearance of the latest hedges is a welcome sight. So, when this company sells itself, investors will have a good idea that a market top is somewhere in the neighborhood time period. The Eagle Ford, in particular, is one of the most profitable basins in the United States. 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. 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. This managing is changing to an opportunistic hedging. Investors should be expecting steady revisions throughout the fiscal year as opportunistic acquisitions are made (and maybe an occasional sale). And hello cash flow! I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. Get analysis on under followed Oil & Gas companies with an edge. I have a high school teaching credential and an MA in Math Education. Most wells drilled in the current environment pay back within months. (Note: This article was in the newsletter May 19, 2022, and has been updated as appropriate). 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. I am a high school teacher for a decade. Management has kept the focus on extra cash flow at considerably lower prices. The company is getting "back on track" with the original plan to convert to an operating company with an optimal amount of production. The dividend does have priority. Management has an advantage in the form of some competitive secondary recovery prospects that have very low production decline profiles to lower the company average production decline each year. I have a high school teaching credential and an MA in Math Education.

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Also, as the company becomes larger, each acquisition will become less material to the company so that recurring operations begin to dominate results. I wrote this article myself, and it expresses my own opinions. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. A large acquisition often takes a few years to optimize. This group has long had a history of buying cheap and selling dear. In fact, the management performance part of the compensation is 100% stock based. I am not receiving compensation for it (other than from Seeking Alpha). Not many of these kinds of companies are public. Accounts Receivable alone soaked up a fair amount of cash generated in the first quarter because commodity prices rose. Interested? Those debt ratings and the market price of the common should climb appropriately. 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. That happens to be just fine with this group because they are not shy about naming a bargain price. That company itself filed bankruptcy with too much debt. That appears to be the case with this acquisition. Management has wisely pursued growth as well as debt repayment. That is a huge advantage over many other companies that offer common stock (with potential capital gains due in the year the deal closes).

Is this happening to you frequently? Many of them just want out and are not too picky about price. The other key part of the slide above is that management is going to avoid the trap that sentenced many limited partnerships to the graveyard by keeping the dividend low (and the debt low as well). But the real test of many of these acquisitions will be the performance of the assets during the next industry downturn. That is an unusual strategy that may not be properly valued by the market. Please disable your ad-blocker and refresh. ) The fourth quarter earnings report has a huge mark-to-market" hedging adjustment that really clouds the operating results.

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). This management team has accomplished a lot in the time it has been in control of the company. The guidance above refers to the company "as is". Not many managements have that option. But 2020 abruptly stopped the transition. This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. The second quarter pricing for all oil and gas companies, including Ring Energy (NYSE:REI), was even better than the first quarter. Steady progress in repaying the debt will have a similar effect. Most likely, the asset story of the value of the leases is back in operating order in the current environment. But the important part to watch is the increasing profitability due to production (and selling price changes). The last deal involving the Unita Basin acquisition is looking very good because prices have risen considerably above the assumptions used for the acquisition. 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. The continuing cash flow is likely to result in more returns to shareholders through higher dividends and share repurchases. That means this company goes into the next cyclical downturn with the initial secondary costs paid back (regardless of what the accounting reports). Mr. Market clearly has some doubts about all of this as seen in the post-merger price. Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. This new company combines two parties with impressive track records of investment gains in a rare public vehicle. In the meantime, there are a lot of deals for stockholder gains to be made. So far, the recovery has been somewhat muted by the debt issues and the increase in shares outstanding. Then again, the whole reason for acquiring assets is to improve performance. That is good news for an industry that has managed to surmount several challenging downturns. Crescent Energy Organizational Structure (Crescent Energy Fourth Quarter 2021, Corporate Slide Earnings Presentation). Disclosure: I/we have a beneficial long position in the shares of CRGY either through stock ownership, options, or other derivatives. I analyze oil and gas companies like Crescent Point Energy and related companies in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space.

But the ability to generate some very good cash flow should remain. In the meantime, the slide above remains unchanged (and for good reason as this industry is very volatile). However, the higher than projected current prices often shield a situation like this from cash flow issues until enough new wells and lower costs have been established throughout the purchase. The investor is warned about this guidance by the word "initial". 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 had a plan that was rudely interrupted first by the OPEC pricing war and then by the coronavirus demand destruction. Newer production tends to be a lot more profitable than older production. This means that there is less maintenance capital needed to maintain production than is the case with competitors that are strictly unconventional.

But now Mr. Market demands proof of the ability to pay investors while growing the business profitably. Management sees a lot of potential bargains in the market. I am not receiving compensation for it (other than from Seeking Alpha). The ability to increase the dividend combined with low debt rate hint at better times to come. 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. This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. 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. Many times, that plan of operation does not work. Crescent Point Energy Second Quarter 2022, Change In Adjusted Funds Flow (Crescent Point Energy Second Quarter 2022, Management Discussion And Analysis).