PENGROWTH ENERGY CORP. $4.90 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 511.8 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 9.8%; TSINetwork Rating: Average; www.pengrowth.com) produced 85,748 barrels of oil equivalent a day (60% natural gas and 40% oil) in 2012. That’s up 15.9% from 73,973 barrels in 2011. However, depressed gas prices pushed down its cash flow by 13.1%, to $538.8 million from $620.0 million. Cash flow per share declined 35.8%, to $1.20 from $1.87, on more shares outstanding.
The stock is down 50% in the past year. That’s because investors are concerned that low gas prices and Pengrowth’s high debt ($1.8 billion, or 75% of its market cap) will force it to cut its $0.04-a-share monthly dividend, for a 9.8% annualized yield.
However, Pengrowth’s rising oil production will cut its risk. It recently began work on its Lindbergh oil sands project, which will produce 12,500 barrels a day by early 2015. That will rise to 50,000 barrels a day by 2018. Moreover, Pengrowth has $4.5 billion in tax pools that it can use to cut its tax bill until 2017.
Pengrowth is still a buy for long-term gains.
