Oil prices are back in the headlines again - this time, as futures tumble below the round $70 level on oversupply concerns. In fact, January-dated crude futures (CLF24) have corrected about 10% over the past month.
However, one small-cap oil and gas stock has been heavily targeted by insider buying in recent weeks, even as commodity prices have tumbled. Here's a closer look.
About Crescent Energy
Founded in 2002, Crescent Energy (CRGY) is an independent energy company engaged in the acquisition, development, and operation of high-quality oil and natural gas properties. Crescent boasts a diverse portfolio comprising both mid-cycle unconventional and conventional assets. These assets are characterized by a long reserve life and a deep inventory of low-risk, high-return development locations, primarily concentrated in the Eagle Ford and Uinta Basins.
The company's market cap currently stands at $1.96 billion, and CRGY is a component of the Russell 2000 Index (RUT).
Crescent Energy stock is down about 7% on a YTD basis. That lags the broader S&P 500 Index ($SPX), but it's roughly on pace with the performance of the S&P 500 Energy Sector SPDR (XLE).
Heavy C-Suite Buying on CRGY
Apparently, some key buyers think CRGY is a good value around current levels.
Insider buying - which refers to stock purchases made by company insiders, such as officers, directors, and stakeholders of 10% or more - is publicly available through Form 4 filings. While large stock sales by insiders often grab headlines, the cleanest sentiment readings can be gleaned from insider buys.
That said, the sheer number of C-suite executives who have scooped up shares of CRGY since early November alone is remarkable - including the CEO, CFO, Chief Accounting Officer, and General Counsel, a team that presumably has a strong handle on the company's finances and future prospects.
Since the current wave of insider buying started in early June, this group has purchased 65,592 shares at an average price of $11.06 for a total of more than $724,000.
The most recent acquisition was by CFO Brandi Kendall on Dec. 1. Kendall, who is also a Managing Director at private equity firm KKR (KKR), purchased 1,140 shares at an average price of $11.4079 for a total value of $13,006. With this transaction, Kendall has now bought Crescent shares worth $131,370 in 2023.
CEO David C Rockecharlie, who made his latest purchase of 10,000 shares on Nov. 30, has been responsible for $478,395 of this year's insider buying.
Over the last six months, there have been 16 insider buys on CRGY, compared to 1 sell - although that sale was for 3 million shares.
Crescent's Strategic Positioning
Given Crescent's modest market cap, as well as recent big-ticket acquisitions by energy giants like Exxon Mobil (XOM), Chevron (CVX), and Occidental Petroleum (OXY), it's worth discussing the company's strategic positioning and portfolio as a potential takeover target.
Permian Basin assets have been a key motivating factor behind many of these acquisitions, but Crescent has a substantial footprint in the Eagle Ford - which is home to some of the lowest breakeven acreage in North America, allowing a faster path to profitability and fewer logistical issues relative to Permian production. This could easily make Crescent an eye-catching acquisition target for a larger company looking to expand without adding “premium acreage” type expenses.
Q3 Earnings Surpassed Expectations
In its latest earnings report, Crescent navigated a volatile oil and gas market well, and managed to beat consensus estimates on both the top and bottom line. Revenues for the quarter came in at $642.4 million, down 25.7% from the previous year, while EPS fell by 87.2% over the same period to $0.35. The company's EPS has topped expectations in four out of the past five quarters.
Average daily net sales volumes rose 4.7% to 157 Mboe/d, while there average realized prices improved sequentially to $43.73/boe in Q3 2023 from $37.89/boe in Q2 2023.
Looking ahead to fiscal 2024, analysts expect 66% EPS growth.
CRGY is Reasonably Valued
Crescent Energy stock appears reasonably priced around current levels. The stock's forward price/sales ratio is 0.43, well below the sector median of 1.35, and EV/EBITDA of 4.40 also represents a discount to its industry peers.
Plus, Crescent offers a dividend yield of 4.3%, with a low payout ratio of 23% that allows plenty of room for more growth.
What Do Analysts Expect for Crescent Energy Stock?
Analysts are optimistic on Crescent stock, which has an average rating of “Moderate Buy” with a mean target price of $17.17. This denotes an expected upside potential of about 52% from current levels.
Out of six analysts covering the stock, four have a “Strong Buy” rating, one has a “Hold” rating, and one has a “Moderate Sell” rating.
