RE:RE:RE:RE:What a disaster buying Winnipeg40 wrote
Anything is possible, but in the last quarter their net debt dropped by approximatley 46 cents a share, or better than 15 cents per month. They have a lot of room Further, their forecast adjusted for todays oil price still yields a 2H fund flow of $150 Million My calculations show that oil at sub $49 is where they would look at reducing dividends
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Yes even with oil at $82 CJ should have annual Cashflow of aprox. $290 million or aprox. $145 million in the second half. Given that oil has been in the $90 plus range for the first two months of the second half and assuming oil stays in the $80 range where it is now CJ should still have Cashflow in the second half or a little over $150 million. From that we have to deduct the $70 million for the increased capex. And then the aprox. $ 48 million for the 5 cent monthly dividend. That leaves aprox. $32 million left over in Free Cashflow.
If CJ stops share buybacks and uses all extra cashflow after capex and 5 cent monthly dividend to pay down debt at current oil prices they will still have aprox. $30 million in debt left at the end of this year.
Having followed and invested in oil stocks for many years its always amazes me how when oil and oil stocks are on an up swing as they have been the last year or two some investors go crazy and start calling for huge dividends and the share price alond with oil prices to skyrocket from already high levels. Thats usually a sign that the top in oil prices is near. This time around is no exception. Many people seem to forget that oil is an extremely volatile commodity and high prices dont last forever.
This is why when oil prices are high is the time for oil companies to get their financial house in order as CJ has done.
CJ currently should have well under $50 million in debt. For many years they had well over $200 million and oil prices in the $50 range not the $80 plus range we have now. CJ is in a completely different financial position now than they have ever been. The only unknown is where oil prices are headed. They could go back up to $100 but they could also keep dropping.
If oil were to stay in this range CJ would end the year with aprox. $30 million in debt. Next year with oil at $80 they would have cashflow of aprox. $280 million. They could drop capex back down to $100 million or less. That would leave aprox. $180 million per year in Free Cashflow. The current dividend costs them aprox. $96 millon per year leaving aprox. $84 million per year for debt reduction, higher dividends, share buybacks or asset purchases etc. Even if oil were to average $70 next year CJ could still pay the 5 cent monthly dividend and bank aprox.. $24 million per year.
Those who try to predict where oil prices are headed have been proven wrong again and again. For those who want to invest in volatile oil stocks the position CJ currently finds itself in is a very good one and should allow it to whether any storms that come along while still paying a nice dividend.
After looking at many oil stocks over the year this one looks about as good as one can get.
Good luck to all.