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Crescent Point's Duvernay oil and gas play sees 'pivotal moment'

The Calgary-based company says it has improved the overall economics of the project

Crescent Point said its Duvernay assets acquired in 2021 will have paid for themselves by the end of the first quarter of 2023. (REUTERS/Rod Nickel)
Crescent Point said its Duvernay assets acquired in 2021 will have paid for themselves by the end of the first quarter of 2023. (REUTERS/Rod Nickel) (Rod Nickel / reuters)

Crescent Point Energy (CPG.TO)(CPG) shares climbed on Wednesday as analysts heaped praise on the company's Kaybob Duvernay oil and gas assets in central Alberta.

Toronto-listed shares climbed about 5.5 per cent in early trading as investors responded to an upgrade from Raymond James analyst Jeremy McCrea, citing a breakthrough two years in the making.

"When Crescent Point bought into the Duvernay in 2021, the play had the potential to change the profitability of the company. Yet with a mixed history of corporate challenges with investors, it would require meaningful evidence that changes were real," he wrote in a note to clients on Wednesday.

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"After two years, with a number of revised completion advancements, and multiple well-pads later, it feels as if we're at that pivotal moment."

McCrea says there is now a "gap" between investor perception and reality.

"For investors, the Duvernay was always the 'next big play.' And ever since 2010, when the first wells were drilled, there always seemed to be some disappointment thereafter, and likely why we see the apprehension today still," he wrote.

Calgary-based Crescent Point hosted a "teach-in" with analysts on Tuesday where senior management spelled out plans to grow Duvernay production from 45 thousand barrels of oil equivalent per day (mboe/d) in 2023 to 70 mboe/d in 2027. The company also says it has improved the overall economics of the project compared to its previous owner, Shell Canada.

Earlier this month, Crescent Point said the $900 million acquisition has performed so well that the assets will have paid for themselves by the end of the first quarter of 2023. In its five-year plan, Crescent Point plans to drill 195 locations in the Duvernay, with 305 remaining locations.

"Even over the 10-year development program, the company only needs an incremental $200 million in infrastructure spend, paving the way for many years of strong mid-cycle returns," Scotiabank Global Equity Research analyst Jason Bouvier wrote in a research note on Wednesday.

"We continue to believe that the company is doing a good job at both growing its inventory and improving overall economics," he added.

McCrea upgraded the company's TSX-listed shares to "outperform" from "market perform," while raising his price target to $12 from $11.50. Bouvier maintains a "sector outperform" rating, and a $8.80 per share price target.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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