Bonavista Energy $1.83 - Toronto Symbol BNP

BONAVISTA ENERGY $1.83 (Toronto symbol BNP; Shares outstanding: 211.7 million; Market cap: $367.5 million; TSINetwork Rating: Extra Risk; Dividend yield: 6.6%; www.bonavistaenergy.com) explores for oil and gas in Alberta, Saskatchewan and B.C. Its output is 75% gas and 25% oil. In the quarter ended September 30, 2015, Bonavista’s cash flow per share fell 26.7%, to $0.44 from $0.60 a year earlier. Most of that drop came from lower oil and gas prices; output rose 5.2%, to 78,599 barrels of oil equivalent a day from 74,720 barrels. Like many producers, the company is cutting back on exploration and development spending. In 2016, it will devote $210 million to this purpose. That’s down from the $283.4 million it spent in 2015, and down sharply from its $639.6 million in 2014. The lower spending will likely cut its production in 2016 to between an average of 73,000 and 76,000 barrels per day. That reduction, along with low oil and gas prices, will cut Bonavista’s per-share cash flow this year to an estimated $1.27, down 28.2% from the $1.77 it will likely report for 2015. It had cash flow of $2.69 a share in 2014. The stock trades at just 1.4 times this year’s forecast cash flow per share. That’s very low for a company with strong potential to grow when oil and gas prices recover. However, the $0.01-a-share monthly dividend, which yields a very high 6.6%, could be cut if oil and gas prices drop further. Bonavista Energy is a hold.

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