Intermediate vows to cut debt by spending less and selling assets
CALGARY — Shares in Lightstream Resources Ltd. tumbled to an all-time low Thursday after it halved its dividend and announced a lower 2014 capital budget that provides for no production growth.
The company also said it will aim to sell $600 million in non-core assets over the next two years as it focuses on reducing debt to no more than two and a half times cash flow by the end of 2015.
“Our business plan for 2014 is focused on balance sheet management,” said John Wright, president and chief executive, on a morning conference call with analysts.
“Although our net debt levels have remained relatively constant over the past seven or eight quarters and our production has grown over that period, we’re not satisfied or in any way proud of the way we’ve been working our debt-to-cash-flow ratio down to our (longer-term) target of two times cash flow.”
He said the company was able to match cash flow in with cash out in the third quarter of 2013 but widening Western Canada price differentials in this quarter have reduced cash flow estimates by about $15 million.
Lightstream, which was founded as PetroBakken Energy Ltd. in 2009 and renamed earlier this year, started with Bakken light oil production assets in Saskatchewan and added Alberta Cardium oil output, both tapped with horizontal wells employing multi-stage hydraulic fracturing — which come on at high levels and quickly decline in the first year.
Wright said the company has slowed its production decline rate from 35 per cent last year to 31 per cent this year and expects 26 to 29 per cent next year as its percentage of older wells rises.
Lightstream shares fell to $5.53 in early trading in Toronto. Its 52-week high was $11.58 on the same date last year.
“In our view the dividend cut and future asset sales represent steps in the right direction to manage the balance sheet,” wrote analyst Michael Harvey of RBC Dominion Securities in a note to investors, “although we note the current surplus of assets for sale on the market, which could hamper sale efforts or negatively affect pricing.”
Lightstream said it plans to spend $525 million to $575 million in 2014, a reduction of 25 per cent from this year and 42 per cent versus 2012, while maintaining the same production of 45,000 to 47,000 barrels of oil equivalent per day (80 per cent oil and liquids), not including assets that may be sold.
It said it would save about $40 million in 2014 by cutting its monthly dividend from eight to four cents. It will also end its popular dividend reinvestment plan and share dividend plan to halt their dilutive affects.
In 2014, Lightstream plans to drill 90 wells for about $360 million in the Cardium of west central Alberta, Swan Hills of northwestern Alberta and Saskatchewan.