RE:RE:RE:RE:Good Read about Upcoming EarningsJayBanks wrote
sclarda wrote:
According to CJs presentation once debt reached $100 million 50% of Free Cashflow would go to dividends and 50% to debt reduction. At the current oil price of aprox. $95 per barrel CJ should have Free Cashflow of aprox. $260 million per year. Half of that is aprox. $130 million. Divide that by the aprox. 160 million shares outstanding and CJ should be paying a dividend of aprox. 7 cents per month.
Once debt reaches $50 million where it should be now they state that they will increase dividends even more. At current oil prices CJ could easily pay a 7 cent monthly dividend and still keep aprox. $125 million per year in Free Cashflow which could eliminate remaining debt in aprox. 4 months from now while paying a 7 cent monthly dividend.
Whatever they do the fact is CJ is a soon to be debt free Free Cashflow machine.
I may buy a little more this week before earnings as they should be spectacular with CJ earning more Free Cashflow last quarter than they would have done in 2 or 3 years a few years ago.
Good luck to all.
I believe it was along the lines of a 25% increase in returns to shareholders after $50mil debt was breeched (which I believe has happened already, which is what we expect to be reported)...
I think we calculated by thier maths they could have paid 7 (maybe 8) cents earlier as a starting dividend, but they wanted to play it safe and started with 5. Theoretically they should be adding 25% to the 7 cent math they originally gave us and that would put us around 9 cents, factor in declining outstanding shares and it becomes more plausible, also the fact oil has still been trading above thier numbers that originally predicted 7... 25% on the 5 cents is only a little over a cent, but with less debt payments, less shares outstanding they could push the 2nd cent and still be pretty safe down to $50 oil or atleast just above which is what they have been playing with.
I agree with the prediction we will be debt free before the end of the new year, (I predicted that long ago when they originally gave us the shareholders return maths and things have been pretty much on par with what they laid out). Debt free they could likely pay 15-16 cents/month and still be building a positive cash cushion. Will they pay 15-16 cents? I'd say it's unlikely but I'm hoping, maybe they pay 10-12 for safety and then give specials when years go well.
At the current 8% yeild, maths say that every penny increase per month in payout should be followed by approximately $1.50 in shareprice appreciation to get us back to 8% afterwards... I'm banking on this being a $9.50-11 stock if they increase the payout 2 cents.
I too am looking at adding early this week, we shall see if I pull the trigger. (I am expecting Freehold Royalties to increase thier dividend as well by 2 cents on this round of earnings, so I'm debating my plan, but CJ is my likely move)
All of us holders should be very pleased late next week and super excited for when we go into debt free waters... I wonder what will be the plan forward from there? Purchases of smaller entities, get taken private or maybe we get sold to a bigger fish within a couple years.
--------------------------------------------------------------------
All kinds of things are possible going forward when you have no debt and a lot of Free Cashflow piling up all over the place. A postion CJ has never been in before.
If i were running CJ i would keep the dividend at 5 cents per month until all debt is payed off in another 3 months. Then i would give a special dividend above the 5 cents of 2 cents per month as long as oil remains above $85. In that way the dividend would not need to be cut in case oil prices drop way down. At the current oil prices CJ would be able to pay a 7 cent monthly dividend and still bank aprox. $130 million per year in Free Cashflow which i would use for share buybacks and mostly pile in the bank for future asset purchases etc.
When oil prices are high as they are now many people seem to forget that they can crash at anytime. Remember that oil was in the $50 range for 6 or 7 years before Covid. We have to remember that everyday CJ is burning up over 20 000 barrels of oil resources. The large Free Cashflow they are making now is not really all profit as they will eventually have to buy more assets to replace the oil being produced everyday.
A 7 cent monthly dividend would yield over 11% at todays shareprice. That should be more than enough for anyone. The rest of the Free Cashflow should be used to pay off debt and pile in the bank for the time when a good deal comes along.
Paying a very high dividend which uses up most of the Free Cashflow when oil prices are high while not saving some money for the future if a bad strategy.
CJ is fortunately in a position where they can pay an 11% dividend and still bank aprox. $130 million per year for future uses.
What else can anyone ask for?