RE:I thought the results were in lineJohnny41 wrote: but it sold off... Not sure why exactly, but I dont think it was all bad news... Dividend stays, is that why it sold off? Anyone think shares might have gained if they cut it in half for example?
Surge has always told the market that they are committed to the “DivCo” model and their goal is to provide a Dividend c/w Modest Growth with an Annual “All In POR” of 100% or less.
Their Guidance had been based on $40 WTI and they overshot the 100% target in 2015 largely due to very low Oil prices in Q4.
To date in 2016 WTI has averaged abt.$32. Although they have done a vey good job lowering costs there is no way for them to have a 100% or less POR in Q1 2016. Don’t forget that the Dividend was reduced by 50% late in Q4 2015 and the reduction was not fully realised in the Q4 results. It will be fully reflected in Q1 and the remainder of 2016.
That said WTI has been improving lately. Stronger prices in the remaining 3 quarters c/w lower costs and the reduced Dividend will enable Surge to meet the Annual 100% POR target but at this point that is far from guaranteed.
Selling non core assets to pay down debt is good. Rising debt due to an unearned Dividend is not good. Once again the Dividend was reduced 50% late in Q4 2015 and we haven’t seen the effect on the Debt and POR yet.
I suspect that the market was expecting a Dividend reduction (I was) and as a result there has been a bit of a sell off.
Improved Oil prices will solve the current problem. It looks like WTI is attempting to break through the $40 barrier (which is being offset a bit by a stronger Loonie). If we don’t get the required Oil Price Improvement Surge will reduce the Dividend as required.
We should be getting Revised 2016 Guidance in the near future.
Surge has Excellent Management and Paul Colborne has a lot of skin in the game. To date they have done a Very Good Job navigating the current low price environment.
As Always; Do Your Own Due Diligence; It’s Your Money !!