Car­di­nal En­ergy low­ers monthly div­i­dend to one cent

Stockwatch Daily - - ENERGY - Mr. M. Scott Ra­tushny re­ports

VOLATIL­ITY IN Cana­dian oil price dif­fer­en­tials, cou­pled with the re­cent de­cline in world oil prices, have caused Car­di­nal En­ergy Ltd. to re-eval­u­ate the cur­rent level of its div­i­dend.

Dur­ing the fourth quar­ter, Cana­dian oil pro­duc­ers have re­ceived em­bar­rass­ingly low prices due to lack of pipe­line egress. In­dus­try is look­ing to truck and rail so­lu­tions to move oil to mar­ket in­stead of trans­port­ing it through the safest most cost ef­fec­tive way in pipe­lines. Our lack of provin­cial and fed­eral gov­ern­ment lead­er­ship and fail­ure to act in get­ting new ex­port pipe­lines built is cost­ing not only Al­berta, but all Cana­di­ans sig­nif­i­cant rev­enue and fu­ture in­vest­ment in our coun­try. This week’s Al­berta gov­ern­ment an­nounce­ment is a much needed short term so­lu­tion but will not solve the long-term take­away ca­pac­ity is­sue fac­ing our in­dus­try.

We en­cour­age our share­hold­ers to voice their dis­ap­proval with the Al­berta gov­ern­ment and their lo­cal Fed­eral Mem­ber of Par­lia­ment on the lack of progress on the con­struc­tion of new ex­port pipe­lines out of western Canada.

Al­though we don’t think that the cur­rent pric­ing dif­fer­en­tials be­tween Cana­dian bar­rels and US bar­rels will be per­ma­nent, we are ob­li­gated to our share­hold­ers to pro­tect our busi­ness and our bal­ance sheet un­til Cana­dian prices im­prove.

Car­di­nal will tem­po­rar­ily re­duce its monthly div­i­dend to $0.01/month ($0.12/year) com­menc­ing with the De­cem­ber 2018 div­i­dend payable on Jan­uary 15, 2019.

The Board of Di­rec­tors plans to re­view the div­i­dend in April, 2019 and make ad­just­ments to the div­i­dend rate to re­flect changes to price dif­fer­en­tials and mar­ket con­di­tions at that time.

Car­di­nal has been de­signed and or­ga­nized to be a low de­cline, div­i­dend pay­ing com­pany. We work on a daily ba­sis to re­duce our op­er­at­ing costs, to run our op­er­a­tions more ef­fi­ciently and to main­tain our peer lead­ing low de­cline rate. We can­not how­ever, con­trol dif­fer­en­tial pric­ing, es­pe­cially in a sit­u­a­tion that has arisen to the ex­treme lev­els ex­pe­ri­enced in the last 90 days.

Our pri­or­ity, first and fore­most is to op­er­ate our busi­ness in the most pru­dent man­ner, to en­sure Car­di­nal share­hold­ers re­tain their long term value we have em­bed­ded in our as­sets and in our com­pany.

In Oc­to­ber, Novem­ber and De­cem­ber we saw oil pric­ing be­low our cost to pro­duce at some of our prop­er­ties. The re­sult­ing loss of rev­enue caused our sim­ple div­i­dend pay­out ra­tio to ex­ceed a level we are com­fort­able with. The an­nounced div­i­dend ad­just­ment will al­low Car­di­nal to catch up the lost free cash flow and main­tain our bal­ance sheet strength.

Dur­ing the first part of the fourth quar­ter, Car­di­nal reached record pro­duc­tion of ap­prox­i­mately 22,000 boe/d, well ahead of our pro­duc­tion guid­ance of 21,000 {A –} 21,500 boe/d, driven by a com­bi­na­tion of lower than fore­casted base de­clines and pos­i­tive drilling re­sults at Bantry and Elm­worth. Our devel­op­ment drilling in­ven­tory has ma­te­ri­ally ex­panded pro­vid­ing Car­di­nal con­fi­dence in both the long-term sus­tain­abil­ity of the as­set base and the fu­ture growth po­ten­tial of our com­pany. Since then, with wi­den­ing Cana­dian oil price dif­fer­en­tials we be­gan to sys­tem­at­i­cally shut-in our higher op­er­at­ing costs prop­er­ties to avoid cash pro­duc­tion losses. As of De­cem­ber 1, ap­prox­i­mately 15% of our pro­duc­tion was shut-in.

With the Al­berta gov­ern­ment’s an­nounced manda­tory pro­duc­tion cur­tail­ment and the ex­pected pric­ing im­prove­ments in Cana­dian oil dif­fer­en­tials, we ex­pect to bring back the ma­jor­ity of the shut in pro­duc­tion in Jan­uary 2019. Tak­ing into ac­count the es­ti­mated cur­tailed vol­ume, Jan­uary pro­duc­tion is cur­rently fore­casted to av­er­age ap­prox­i­mately 20,100 to 20,400 boe/d.

Our fo­cus for 2019 will be to main­tain the in­tegrity of our as­set base, re­duce long term debt and un­der­take cap­i­tal pro­jects that cre­ate long term re­duc­tions in our op­er­at­ing costs.

About Car­di­nal En­ergy Ltd.

Car­di­nal is a ju­nior Cana­dian oil fo­cused com­pany built to pro­vide in­vestors with a sta­ble plat­form for div­i­dend in­come and growth. Car­di­nal’s op­er­a­tions are fo­cused in low de­cline light and medium qual­ity oil in Al­berta and Saskatchewan.

We seek Safe Har­bor.

John Al­bert Brussa, David Daniel John­son, Michael Scott Ra­tushny, James Cameron Smith, Stephanie Ster­ling, Gre­gory T Tis­dale

(CJ) Shares: 116,039,200

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