Dividend reduced amid challenging macro environment. Northern Blizzard announced
a reduction to the monthly dividend from $0.08 per share to $0.04 per share,
effective for the August dividend payable in September. While the reduction to
the dividend was a surprise to us given the financial strength of the balance
sheet, in our view, it is a prudent decision by management that indicates that
the company is concerned with long-term sustainability rather than short-term
appearances. Given the challenging commodity environment for heavy oil
producers, a rationalized income stream helps the balance sheet and more
favourably calibrates financial flexibility versus dilution from dividends taken as stock. . Hedge book protects balance sheet and provides financial flexibility and cash
flow certainty. Northern Blizzard has oil hedges in place that cover 79% of our
production estimate for the remainder of the year. As for 2016, hedges in place lock in 68% of production.
. We have maintained our SP rating and one-year price target of $10.50/sh.