PENGROWTH ENERGY $4.09 - Toronto symbol PGF

PENGROWTH ENERGY $4.09 (Toronto symbol PGF; Shares outstanding: 534.6 million; Market cap: $2.1 billion; TSINetwork Rating: Average; Dividend yield: 5.9%; www.pengrowth.com) produces oil and natural gas, mostly in Western Canada. It recently started up its Lindbergh oil sands project in eastern Alberta, which should produce 16,000 barrels a day by the end of 2015.

In the three months ended December 31, 2014, Pengrowth’s cash flow rose 10.0%, to $0.22 a share from $0.20. The company sharply cut its operating costs, offsetting a 7.2% production decline, to 71,802 barrels of oil equivalent a day from 77,371.

The company will spend $200 million on exploration and development in 2015, down 74.0% from $770 million last year. Even so, it expects to produce 73,000 to 75,000 barrels a day in 2015, up about 1.5% from 2014.

Pengrowth cut its monthly dividend by 50.0%, from $0.04 a share to $0.02, with the March 2015 payment. But the new annual rate of $0.24 still yields a high 5.9%.

The company plans to use any excess cash flow to pay down its $1.9 billion long-term debt, which is a high 90% of its market cap. Pengrowth trades at 4.8 times its forecast 2015 cash flow of $0.85 a share.

Pengrowth is still a buy.

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