Crescent Point Energy Corp., the most acquisitive of Canadian energy companies this year, is searching for U.S. buying opportunities as far afield as Texas to increase oil production.
After spending $2 billion for smaller operators and land near the Calgary-based company’s Saskatchewan and Alberta light-oil fields, Crescent Point is seeking targets to ply its “technical expertise” in the U.S. and help boost its output 44 percent by 2017, Chief Executive Officer Scott Saxberg said.
Crescent Point employees in Denver are looking for assets across the continent, Saxberg, 44, said in an Oct. 18 interview in his Calgary office.
“There’s more opportunities than there are dollars chasing them,” in the U.S., he said. “In Texas, there are more assets for sale than any other time.”
The company, Canada’s seventh-biggest oil and natural gas producer by market value, could tap equity markets for acquisition funding as oil prices have recovered since June, while not neglecting another 20 years of drilling on existing acreage, Saxberg said.
Crescent Point’s six Canadian energy purchases this year top four acquisitions by Pacific Rubiales Energy Corp. and three by Mitsubishi Corp., figures compiled by Bloomberg show.
Crescent Point’s experience using horizontal drilling to discover new fields in Western Canada and coaxing oil from reservoirs with water floods give it an edge in the U.S., Saxberg said, declining to identify areas of interest.
“We’re always looking for opportunities, so on a macro basis for our company, we’re still continuing to consolidate in our main core areas and look for that new area,” Saxberg said. The company plans to lift oil production, 90 percent of output, to 137,000 barrels a day in five years, from 95,000, he said.
A North Dakota expansion could be strategic for Crescent Point, and the proximity to its Saskatchewan operations might comfort investors, said Gordon Currie of Salman Partners.
“Going to Texas and the offshore Gulf of Mexico, that would be a stretch,” Currie, an analyst who rates the company a buy and doesn’t own the shares, said in a phone interview from Calgary.
Crescent Point moved into North Dakota in 2010, acquiring more than 85,000 acres in the Bakken and Three Forks formations, according to the company’s website.
The foothold in the state is “pretty small” relative to the company’s position in the southeast Saskatchewan Bakken and Shaunavon in the province’s west, Saxberg said. Crescent Point has kept North Dakota drilling low in a high-cost environment set to deflate as competitors slow activity, he said.
Crescent Point picked up Calgary-based oil and gas companies Wild Stream Exploration Inc., Cutpick Energy Inc. and Reliable Energy Ltd. and made three other asset purchases this year to expand in Western Canada, many of the deals having taken several years to develop, Saxberg said.
The company now controls 95 percent of the Shaunavon area and 80 percent of the Saskatchewan Bakken, he said.
Willing investors allow Crescent Point to pay “healthy prices,” regularly over $100,000 a flowing barrel, Currie said. The company issued no debt to make acquisitions this year and raised about C$1.24 billion ($1.25 billion) in two equity issues.
“They’re simultaneously the most acquisition-oriented company in their peer group but also pretty liberal with equity,” Currie said. “The market’s pretty happy with what they’re doing.”
Crescent Point rose 93 percent on the Toronto Stock Exchange in the five years through Oct. 19, compared with a 18 percent drop for the Standard & Poor’s/TSX Energy Index. Crescent Point has lagged this year, falling 5 percent, while the energy index has dropped 1.5 percent. Crescent was little changed at C$42.92 at 9:57 a.m. in Toronto today.
The company has a dividend yield of 6.5 percent, and the highest rate of reinvestment among its peers, with 57 percent of dividends declared in 2011 reinvested, Currie said. It ranks No. 11 in dividend yield among companies in the index.
Among analysts rating the stock, 17 recommend to buy, five advise to hold and one suggests selling. Crescent Point is scheduled to release third-quarter results on Nov. 8, when it is projected to report profit excluding one-time items of C$36.2 million, or 11 Canadian cents a share, based on average analysts’ estimates compiled by Bloomberg.
Investors remain “very supportive” of Crescent Point, but there’s a limit to how much equity the company can issue, said Mason Granger, who manages C$500 million at Sentry Investments Inc. in Toronto, with Crescent Point as a “core” holding.
“From time to time, I feel like there’s deal fatigue,” Granger said in a telephone interview. “They issue paper a lot.”
Trent Stangl, a Crescent Point spokesman, didn’t return a telephone call and e-mail on Oct. 19 seeking comment.
Saxberg will probably buy in the U.S. next, with fewer large targets left in western Canada, Granger said.
“It’s a whole different ball game on the U.S. side and transaction multiples have been pretty high,” he said. “Can they make that work?”
Crescent Point’s biggest challenge is “not getting too carried away,” Saxberg said. “Not going too fast too hard, not driving costs up and maintaining a good growth rate and a good development strategy and not overdoing it,” he said.
The company is one of the most “proactive” companies in Calgary to hedge oil prices to reduce risk, Currie said. “These guys are very good about it,” Currie said. “They do it two or three years out in the future.”
Investments to connect Crescent Point’s Saskatchewan fields to rail lines that began three years ago are paying off, Saxberg said.
As pipeline bottlenecks depressed Canadian crude prices in the second quarter, the company was making C$10 a barrel more moving oil by rail to eastern Canada and the Gulf of Mexico, he said. Crescent Point is doubling its rail capacity, a “safety valve” against pipeline disruptions, he said, to 45,000 barrels a day this year.