More energy industry dividends are being slashed as investors turn their backs on companies whose payouts are now unaffordable with oil prices plunging to less than US$30 per barrel.
Shares in Calgary-based TORC Oil & Gas Ltd., which announced an 80 per cent cut in its dividend after markets closed Monday, bounced between 63 and 78 cents on Tuesday morning, a fraction of their 52-week high of $5.47 set in April of last year.
AltaCorp Capital analyst Patrick O’Rourke says the move is a welcome attempt to balance cash flows with payouts, adding TORC has been one of the weaker performers as oil prices softened in recent weeks because its dividend was not sustainable.
Meanwhile, PrairieSky Royalty Ltd., which earns revenue from producers who drill on lands where it owns the mineral rights, announced it would cut its dividend by 69 per cent after markets closed Monday.
It’s shares fell by as much as 12.8 per cent to $6.98 on Tuesday.
The size of the reduction caught analysts by surprise, with Jamie Kubik of CIBC pointing out PrairieSky is debt-free and doesn’t need to raise capital to maintain its business model.
“This is deeper than we expected, but also prudent and consistent with what we have seen from operators to date,” he said in a report.