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CALGARY – To survive the prolonged downturn in oilfield activity, many energy service information mill poised to cut their dividends to zero.
“Despite two-thirds of our coverage universe having already made sizable dividend cuts in the last year, we feel more are on the horizon within the coming quarters,” CIBC World Markets analyst Jon Morrison said inside a research note.
The companies Morrison expects to make further cuts start adding some of the biggest oilfield service companies in Canada, like Precision Drilling Corp., Ensign Energy Services Inc. and Calfrac Well Services Ltd.
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Before the oil price rout began, Calfrac paid a 12-cent-per-share quarterly dividend but trimmed that payout to 1.5 cents per share as West Texas Intermediate oil prices collapsed.
Morrison now expects Calfrac to cut that dividend to zero, and that he downgraded the Calgary-based pressure pumper’s stock to “sector performer” from “sector outperformer.”
Calfrac’s “existing leverage ratios, long-term balance sheet challenges and soon-to-be-vacant CFO chair creates to many headwinds that should be addressed before we can concentrate on the ‘upside case’ within the equity,” Morrison said.
The rout in oil prices is not kind to fracking companies. Calfrac’s stock price has fallen from over $20 per be part of the center of 2014 to $1.15 each.
Financial Post
gmorgan@nationalpost.com
Twitter.com/geoffreymorgan
