BONAVISTA ENERGY $4.63 (Toronto symbol BNP; Shares outstanding: 206.6 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 9.1%; www.bonavistaenergy.com) explores for oil and natural gas in Alberta, Saskatchewan and B.C. Its output is 75% gas and 25% oil.
In the three months ended June 30, 2015, Bonavista’s cash flow per share fell 34.3%, to $0.44 from $0.67 a year earlier.
Most of that drop came from lower oil and natural gas prices; the company’s output fell only slightly, to 73,736 barrels of oil equivalent a day from 74,273 barrels.
Like many producers, the company is cutting back on exploration and development spending. This year, it will devote $310.0 million to this purpose, down sharply from $639.6 million in 2014.
Even with the lower spending, its 2015 output should rise to an average of 82,516 barrels a day from 77,211 in 2014. But with oil prices under $60 U.S. a barrel—and gas prices near five-year lows at $2.89 U.S. per thousand cubic feet—Bonavista’s per-share cash flow will likely fall 31.6% this year, to $1.84 from $2.69 in 2014.
The stock trades at just 2.5 times this year’s forecast cash flow per share. That’s reasonable for a company with strong potential to grow when oil and gas prices recover. However, the $0.035-a-share monthly dividend, which yields a very high 9.1%, could be cut if prices drop further.
Bonavista Energy is a hold.
