RE:Wow....What's up here?I think a lot of it boils down to displeasure from institutional investors, and I'm sure many of us, on the actions of the BOD over the past few quarters, and perhaps years. Looking at the voting results from the AGM, it is clear that this is the case. Don Gray, the chairman of the board, was barely relected. The results were not posted on Peyto's website, but they can be found on SEDAR. As far as the direction of the SP, we still appear to be in a rising interest rate environment, and Peyto obviously remains one of the more leveraged NG plays in Canada. In light of this, the BOD seems resolute in paying out what amounts to ~$230M annually in dividends rather then deleveraging in a much more meaningful way. The hedgebook obviously looks a heck of lot better than in years past, and provides the FCF to pay the dividend without taking on debt, but as owners, or prospective owners of the company, people are certainly asking, "Is that the best use of capital?" The NG market is still in contango, which should probably still allow for continued FCF generation beyond the dividend over the next couple of years, and that's been the justification used by management as to why it is not being reduced, but despite being in contango, spot and futures prices are quite a bit weaker than a couple of quarters ago, and again, borrowing costs on debt don't appear to be getting cheaper any time soon. The other consideration perhaps is that Peyto always seemed to be held in high regards with respect to their operational excellence, but over the past few quarters there seems to be one issue after another which has caused their production to steadily decrease, and costs to continue to creep up (related), despite continually selling the investor on growth.
Anyway, I'm still long PEY, but much more wary. GLTA