How are energy investors positioned?
On Thursday, JPMorgan analyst Arun Jayaram reiterated a Neutral rating and a $12.00 price target for Crescent Energy (NYSE:CRGY), which currently trades at $8.13. According to InvestingPro data, the stock has fallen 43.71% year-to-date, though it showed recent strength with a 9.42% gain over the past week. Jayaram’s assessment highlighted that despite Crescent Energy’s strong free cash flow (FCF) profile at lower oil prices, the company’s shares have significantly underperformed compared to their small to mid-cap (Smid cap) oil peers. The stock currently trades below its Fair Value, based on InvestingPro’s comprehensive valuation model, which considers multiple factors including the company’s significant debt burden and trading multiples.
Jayaram pointed out that in a scenario with oil at $50 per barrel and gas at $3.50 per Mcf, Crescent Energy’s shares could yield a 14% FCF, surpassing the average among its peers. For the first quarter of 2025, JPMorgan’s estimates align with the consensus, anticipating total production of 256 thousand barrels of oil equivalent per day (MBoe/d), including 102 MBo/d of oil. These figures are slightly below the consensus forecasts of 258 MBoe/d and 103 MBo/d for oil, respectively. The company’s revenue growth has been robust, with InvestingPro data showing a 23.01% increase in the last twelve months to $2.93 billion, demonstrating strong operational execution despite challenging market conditions.
The forecast for Crescent Energy’s first-quarter 2025 earnings before interest, taxes, depreciation, amortization, and exploration (EBITDAX) is $536 million, with a cash flow per share (CFPS) estimate of $1.75, which is in line with the consensus. JPMorgan projects $248 million in capital expenditures for the quarter, compared to the street estimate (STe) of $250 million, and anticipates approximately $200 million in FCF for the quarter before accounting for working capital changes.
Jayaram also reviewed Crescent Energy’s well productivity trends, noting that 2024 performance in the Western and Central Eagle Ford regions met or exceeded expectations, with a year-over-year increase in oil productivity. However, the Uinta Basin showed a 19% decrease in five-month oil productivity year-over-year, based on a small data set. Regarding capital allocation, the analyst suggested that Crescent Energy might direct more spending towards its dry gas or combo plays in the Eagle Ford shale, benefiting from strong natural gas prices.
For 2025, JPMorgan updated its model to forecast a total production volume of 259 MBoe/d with a capital expenditure program of $975 million, which aligns with the street’s estimates. The forecast for oil production is slightly below the street’s estimate, at 105 MBo/d compared to 106 MBo/d. Based on recent strip prices, Crescent Energy’s FCF for 2025 is projected to be approximately $796 million, equating to a 37% FCF yield, with a total shareholder return of $134 million. The reiterated Neutral rating and December 2025 price target of $12 per share reflect JPMorgan’s continued conservative stance on Crescent Energy. Notably, InvestingPro analysis reveals analyst targets ranging from $8.10 to $21.00, with additional insights available in the comprehensive Pro Research Report, which provides detailed analysis of the company’s financial health, valuation metrics, and growth prospects.
In other recent news, Crescent Energy reported its fourth-quarter 2024 earnings, with earnings per share significantly exceeding expectations at $1.08 compared to the forecasted $0.4616. However, the company’s revenue fell short, coming in at $875.29 million against the expected $896.62 million. Additionally, Crescent Energy expects to report approximately $7 million in cash received from hedge positions for the first quarter of 2025, including a positive adjustment of $18 million from the SilverBow (NYSE:SBOW) Merger. In a strategic move, Crescent Energy has completed a corporate structure simplification by converting all Class B common stock into Class A common stock. This aims to align stockholder interests and enhance financial transparency. Meanwhile, Crescent Energy’s stock target was lowered by Mizuho (NYSE:MFG) to $14, maintaining a Neutral stance, and by Raymond (NSE:RYMD) James to $18, which still carries a Strong Buy recommendation. These adjustments were influenced by Crescent’s capital reallocation to dry gas assets in the Eagle Ford region and recent declines in oil prices. The company remains focused on capital allocation flexibility and strategic asset management to maximize returns.
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