Math on Divi cut?Can someone show their math on why they think Peyto will cut the divi? From all the communications thus far, they are telegraphing the idea of holding production flat rather than growing. This implies reducing the H2 2018 capital budget by around $100MM which would leave the full year budget around $350MM.
From what I can tell, the math works and they are able to pay the dividend and maintain production even at current levels. Obviously there is some uncertainty based on realized prices but this seems most likely absent further negative movement on AECO.
Additionally PEY debt has fluctuated between roughly $1.1B and 1.3B all the way back to 2015 (that’s as far back as I went). I don’t see the debt situation as materially changed given that production has grown by approx 25% over the same period. Debt markets also cast a vote of confidence this week as they were able to raise $100MM for 3.95%.
Right now I see Peyto as a company that can continue to pay $1.32/share for at least 1-2 years and then when supply/demand correct themselves they can return to growing production. Keep in mind sustaining capex will continue to fall YoY if they stop growing production for a period of years.
Now that we have all read so much about certain individuals doing “analysis” and concluding that a dividend cut is inevitable, can one of you please reveal your thought process for all to see?