CALGARY — Shares in Crescent Point Energy Corp. fell Tuesday morning after it said it would slash its dividend by nearly 90 per cent and plow some of the savings into share buybacks.
The oil and gas company also announced it would chop its capital budget for this year by about $500 million to between $1.2 billion and $1.3 billion in view of lower global oil prices and volatility in crude markets.
“This year’s budget highlights the new team’s emphasis on returns and capital allocation,” said Craig Bryksa, who replaced long-time CEO Scott Saxberg last May.
The Calgary-based producer expects to generate annual average production of 172,000 barrels of oil equivalent per day in 2019, unchanged from last year after adjusting for 2018 asset sales.
It said it would continue to market assets for sale while realizing operating efficiencies. It laid off about 230 employees and full-time contractors in September to reduce its staff to about 1,200 people.
The company said it will pay a quarterly dividend of a penny per share and buy back and cancel up to seven per cent of its outstanding shares under a normal course issuer bid. It had been paying a monthly dividend of three cents per share or the equivalent of nine cents per quarter.
Analysts said the dividend reduction and share buyback make sense in view of Crescent Point’s high debt levels and poor share price performance.
“At current levels, we were of the view that a dividend cut was likely, although the magnitude of the dividend cut may be seen by some retail/yield-based investors as overly excessive,” said analyst Thomas Matthews of AltaCorp Capital in a report.
Kristopher Zack of Desjardins calculated the lower dividend would save Crescent Point about $175 million per year while cutting its yield to about one per cent at the current share price.
Several Calgary oil companies have reported lower or stand-pat capital budgets for 2019 in view of Alberta government curtailments that started Jan. 1 designed to ease a glut of crude that overwhelmed pipeline capacity and fuelled high price discounts last fall.
Tamarack Valley Energy Ltd., for instance, cited the cuts Tuesday as it released its 2019 capital budget of about $175 million, down 23 per cent from last year.
Crescent Point produces most of its oil in Saskatchewan, North Dakota and Utah, however, and isn’t affected by the Alberta move.
Its shares were down nine cents at $4.41 in trading on the Toronto Stock Exchange.