RE:RE:RE:RE:RE:RE:RE:Company needs to raise the dividend now imoHi Joseph, agree with your outlook on the longer term frame, there is a lot of return potential from these levels. I have bought to hold, and added at and below these levels significantly. I am likely being too optimistic in the shorter term, but they certainly have capacity from the change in cash flow that has occurred.
Will these prices prove ephemeral? I guess that risk can be justified in using a conservative approach... personally i think we've turned the corner on $20, even $30's EDM prices for a long time at least.
In their div cut PR, they mentioned some factors they would need to see and i think those have started to unfold:
"Until there is a required rebalancing of supply and demand, which could occur through a number of factors including
- the willingness of provincial and federal governments to build pipelines taking oil to tidewater, -
- further industry production shut-ins,
- additional crude by rail capacity coming on-line,
- the start-up of Enbridge Line 3 replacement and
- refinery demand increases,
then specifically to the dividend outlook:
"Bonterra remains committed to a dividend paying strategy. As evidenced by the Company’s dividend and capital spending history, Bonterra will continue to monitor the broader commodity price environment and resultant corporate cash flows. Bonterra remains one of the lowest cost producers of conventional light sweet oil, and should pricing permit, the Company has maintained the flexibility to adjust the dividend, increase capital spending or a combination of both."
Pricing of late could definitely 'permit', but it comes down to what mesage the company wants to convey short term, with choice and use of the funds as you say. I do think they have the felxibility to send more than one message, as they could pair what will be horrible q4 PR with a div raise for march 31. But fair, I would think the status quo with mgmt is to be conservative and wait longer on prices strength to prevail. But they have also shown commitment to the dividend for shareholders especialy when there is capacity to raise, they have a long history of raising and also cutting.
One cent more would only be 330 grand recognized in q1, and ostensibly the company could also have a qtr of improvement to show the track they are on for debt replacement.
Oil prices broke into the mid 50's for oil on Jan 9th, and have held low 50's for most of the qtr so far. Differentials have also hoovered around 2.50-4 in the same time frame. If Oil prices can hold above 52 through march, 10% lower than current prices, there is between $11-16mm in funds that could of been committed to debt reduction in q1.
A 1 cent raise is $1mm more at risk until H2... or, 21 cents on the current 50's range oil price, 1/5 of 1 percent of the oil price.
It really is inconsequential with current funds flow, so yes it is all about the message mgmt wants to send for the time being. To me it makes sense to pair the bad news with good, and to be fair, maybe i am being greedy aha.. but the setup is there. Either way, you are right patience will be key.