from RBC Capital Markets 2014 Guidance; Dividend Reduced
Our view: While the dividend cut signals a step in the right direction, we
do not believe the cut is large enough to significantly change investment
levels or growth outlook, in our view. We have modestly increased 2014
production estimates but remain slightly below guidance on a slightly
higher capital budget than planned.
Management has highlighted a lasting commitment to the high yield, low growth
business model. The dividend was cut from $0.05/share per month to
$0.04/share per month. We believe that at a post-cut yield of 9.5%,
the company remains susceptible to the same issues it has faced in the
past; keeping a balanced payout ratio while battling corporate production
declines. Our slightly more conservative estimates result in an effective
payout ratio of 115% and draws on the company's bank facility.
Maintaining Sector Perform Rating. We maintain a Sector Perform
recommendation and a $6.00 price target based on a 0.6x multiple of Base
NAV, which is below the oil weighted peer group average of 1.4x.