In a Nov. 29 research note, analyst Jamie Kubik reported that Bonterra Energy Corp. (BNE:TSX) will reduce its dividend by about 90% to CA$0.12 per share from CA$1.20 annually, beginning with the November dividend (payable in December).
CIBC considers this change "prudent," Kubik noted. "While the stock may not be immediately rewarded for this move, we see it as ultimately being the right choice considering the pressure on realized pricing and producer cash flows in the current environment," he added.
He pointed out that this dividend lowering will afford Bonterra improved financial flexibility to weather today's environment and the chance to pay down debt as price levels increase, likely in H2/19.
To reflect the new dividend figure, CIBC revised its models on Bonterra. Specifically, Kubik explained, "given the differentials on light oil remain wide in H1/19, we have back end weighted our capital spending expectations for 2019 and moderated our capital efficiency assumptions, given we anticipate management will look to high-grade its capital program."
Consequent to the above, the bank reduced its price target on Neutral-rated Bonterra to CA$11 per share from CA$13. The energy company is trading today at around CA$7.11 per share.
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Disclosures from CIBC, Bonterra Energy Corp., November 29, 2018
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Important Disclosure Footnotes for SSR Mining Inc. (SSRM)
· CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Bonterra Energy Corp. in the next 3 months.
