Longview Oil Corp LGVWF

Longview cuts the dividend/ ramps up growth

[Nawaralsaadi]

LNV announced a reduction in the annual dividend from 60c per share to 48c per share, while announcing a 44% increase in the capex budget; as a result cash flow per share is expected to increase by 20% while oil production will grow by 12% (total production will increase by 5.8% as NG production declines).

https://finance.yahoo.com/news/longview-announces-2014-guidance-001400048.html

Despite the dividend cut, I think the new budget better position LNV for the long term. LNV has an extensive asset portfolio, which if exploited properly could lead to a major increase in reserves, production, cash flows and eventually a re-introduction of a higher dividend.

LNV trades at a significant discount to its dividend peers, I believe part of that discount was due to the company inability to sustain let alone grow production on sustainable basis. The 2014 budget seems to strike a better balance between growth and dividend distribution and should eventually lead to a higher valuation, thus permitting the company to grow further down the line by utilizing its stock as a currency.

Having said the above, the resolution of the Advantage/Longview relationship remains key, the new budget renders LNV more attractive to an eventual buyer of Advantage 45% stake as the company has finally delivered a business plan that is better aligned with the performance and production potential of its asset base.

I believe the market will react favourably to the new budget plan; LNV has not been rewarded for its higher dividend as the market seems to have been signalling an interest in a better balance between growth and income. I believe the company could have continued paying its previous dividend, while choosing a slower growth path, however I doubt such a budget would have lead to a re-rating for the stock as this budget could going forward.

Regards,
Nawar