On Thursday, Raymond (NS:RYMD) James updated its stance on Crescent Energy (NYSE:CRGY), increasing the price target from $20.00 to $22.00, while reiterating a Strong Buy rating for the stock. The stock, which has delivered a robust 31.4% return over the past year, is trading near its 52-week high of $15.54.
This adjustment follows Crescent's announcement of a significant acquisition and subsequent financial actions. According to InvestingPro data, 7 analysts have recently revised their earnings expectations upward, suggesting growing confidence in the company's prospects.
Crescent Energy, currently valued at $3.35 billion in market capitalization, has entered into an agreement to acquire Ridgemar Energy for a total consideration of $905 million, a transaction that is valued at a multiple of 2.7 times EBITDA.
In conjunction with the acquisition, Crescent Energy has initiated a secondary offering of approximately 21.5 million shares to raise around $300 million before fees and has given underwriters the option to purchase an additional 3.225 million shares, potentially bringing in another $45 million.
InvestingPro's comprehensive analysis shows the company operates with a debt-to-equity ratio of 1.13, an important metric to monitor given this acquisition.
Moreover, Crescent has issued $400 million in senior debt with an interest rate of approximately 7.6%, maturing in 2032. The assets from Ridgemar Energy currently yield about 20,000 barrels of oil equivalent per day (boe/d), with oil making up 77% of the production. The assets are subject to a base decline rate of just over 30%, which would bring Crescent's total company pro forma decline rate to around 25%.
The financial analyst anticipates that Crescent will operate a half rig on the newly acquired properties, which would require an additional capital investment of approximately $100 million next year. The acquisition is projected to be approximately 10% accretive to Crescent's free cash flow (FCF) figures for both 2025 and 2026, with both years expected to see around a 23% increase. Over a five-year period, the deal is estimated to be about 20% accretive to free cash flow.
The analyst's commentary highlighted the financial benefits of the acquisition and the subsequent equity and debt offerings, leading to the reaffirmed Strong Buy rating and the increased target price for Crescent Energy's shares. With revenue growth of 12.6% and an EBITDA of $1.47 billion in the last twelve months, Crescent Energy shows strong operational performance.
For deeper insights into Crescent Energy's valuation and growth prospects, including exclusive Fair Value calculations and detailed financial health scores, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Crescent Energy has been in the spotlight for several significant developments. Truist Securities has increased Crescent Energy's stock price target to $18.00, maintaining a Buy rating following the company's announcement of a substantial $905 million acquisition of assets from Ridgemar Energy. This strategic move adds approximately 20 thousand barrels of oil equivalent per day to Crescent's production and around 140 complementary drilling locations.
Crescent Energy has also launched a public offering of 18 million shares of its Class A common stock, managed by Wells Fargo (NYSE:WFC) Securities, LLC, KKR Capital Markets LLC, Raymond James & Associates, Inc., and Evercore Group L.L.C. The proceeds from this offering, along with the offering of $300M in senior notes, are intended to fund the Ridgemar Acquisition.
The company's third quarter results for 2024 reported record production levels of 219,000 barrels of oil equivalent per day, surpassing previous expectations. Crescent Energy revised its production outlook upward for the third consecutive quarter, with anticipated capital expenditures ranging from $425 million to $455 million for the remainder of the year. The company reported an adjusted EBITDA of approximately $430 million and a levered free cash flow of $160 million.
These recent developments reflect Crescent Energy's commitment to disciplined capital allocation, strategic growth, and long-term shareholder value. The company continues to explore strategic mergers and acquisitions, while maintaining a solid balance sheet, with net leverage standing at 1.5 times.
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