PENGROWTH ENERGY CORP. $4.15(Toronto symbol PGF; Aggressive Growth and Income Portfolios, Resources sector; Shares outstanding: 530.2 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.8%; TSINetwork Rating: Average; www.pengrowth.com) recently started up its Lindbergh oil sands project in eastern Alberta, which should produce 16,000 barrels a day by the end of 2015.
Due to falling oil prices and Lindbergh’s completion, Pengrowth plans to spend $200 million to upgrade and maintain its properties in 2015, down 74.0% from $770 million last year.
But even with the lower spending, Pengrowth expects to produce between 73,000 and 75,000 barrels a day (57% oil and liquids, 43% natural gas) in 2015, or about 1.5% more than in 2014, thanks to Lindbergh.
The company has hedged 75% of its 2015 oil production at $93.96 (Canadian) a barrel, which is well above today’s price of $49.40 U.S. It has also hedged 49% of its gas output at $3.77 (Canadian) per thousand cubic feet, compared to the current price of $2.83 U.S. The company’s hedges, worth $421 million as of December 31, 2014, will help stabilize its cash flow.
Pengrowth is also cutting its monthly dividend by 50.0%, from $0.04 a share to $0.02, starting with the March 2015 payment. The new annual rate of $0.24 still yields a high 5.8%.
The company plans to use any excess cash flow to pay down its long-term debt of $1.9 billion, which is a high 86% of its market cap. About $170 million of this debt is due in 2015.
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