CALGARY – To survive the prolonged downturn in oilfield activity, many energy service information mill poised to cut their dividends to zero.
“Despite two-thirds in our coverage universe having already made sizable dividend cuts over the past year, we believe more take presctiption the horizon in the coming quarters,” CIBC World Markets analyst Jon Morrison said inside a research note.
The companies Morrison expects to create further cuts start adding some of the most popular 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 at least one.5 cents per share as West Texas Intermediate oil prices collapsed.
Morrison now expects Calfrac to chop that dividend to zero, and 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 need to be addressed before we are able to concentrate on the ‘upside case’ in the equity,” Morrison said.
The rout in oil prices has not been kind to fracking companies. Calfrac’s share price has fallen from over $20 per share in the center of 2014 to $1.15 each.
Financial Post
gmorgan@nationalpost.com
Twitter.com/geoffreymorgan
