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

[terroir]

Interesting move in light of the anticipated AAV announcement.  Kind of mixed emotions regarding market reaction. Weakness may be an opportunity. It will depend on how the market views the likelihood of success of the capital plan. I take it that you are confident that this is the better path to a sustained success. Do you have any concerns about current results? terr

[Nawaralsaadi]

Terr, It is clear that LNV has disappointed on production over the last couple of years, and even if they would have delivered, at best they would have sustained flat production at a $45m capex budget (according to my estimates), which could have capped the stock price at a high yield due to the lack of growth. I believe the company has a deep and valuable oil portfolio, but it requires a

[Al42]

I always manage to get the timing wrong... I pulled the trigger on a few thousand shares yesterday to average down a bit and then we get the divendend cut announcement!! What timing and I fully expected the SP to drop close to the amount of the cut as has happened with most stocks recently. I put a buy order in this morning for another few thousand shares at $4.45 but it didn't get down there.