Gran­ite Oil sus­pends De­cem­ber div­i­dend

Stockwatch Daily - - ENERGY - An anony­mous di­rec­tor re­ports

GRAN­ITE OIL Corp. has pro­vided an up­date to its div­i­dend pol­icy.

From Septem­ber 2018, the Cana­dian en­ergy sec­tor has faced un­prece­dented dis­counts for its crude prod­ucts that have had ma­jor im­pacts on the in­dus­try, the prov­ince and the coun­try. These dis­counts are a re­sult of crude in­ven­tory builds re­lated to Amer­i­can re­fin­ery main­te­nance shut­downs and Canada’s lack of ac­cess to in­ter­na­tional mar­kets out­side of the United States. More re­cently, broader in­dus­try sen­ti­ment has been af­fected by con­cerns of in­creas­ing global sup­ply, par­tic­u­larly in the United States, which has pushed West Texas In­ter­me­di­ate (‘WTI’) down nearly $10 USD per bar­rel since the end of Oc­to­ber.

The re­cent de­ci­sions by the Al­berta Gov­ern­ment to in­state manda­tory pro­duc­tion cuts and pur­chase ad­di­tional trans­port-by-rail ca­pac­ity are pos­i­tive steps to alleviate neg­a­tive pres­sure on Cana­dian pric­ing. How­ever, con­cerns re­gard­ing con­tin­ued volatil­ity, com­mod­ity price pres­sure and po­lit­i­cal un­cer­tainty over the com­ing months re­main high. While Gran­ite ex­pects im­prove­ment in Cana­dian oil pric­ing through the first half of 2019, the Com­pany also be­lieves it is crit­i­cal to take pru­dent, de­ci­sive steps to max­i­mize the strength and flex­i­bil­ity of the Com­pany over the long-term. To this end, man­age­ment and the Board of Di­rec­tors of Gran­ite have de­cided to sus­pend the pay­ment of div­i­dends ef­fec­tive De­cem­ber, 2018. The Novem­ber 2018 div­i­dend, payable to share­hold­ers of record on Novem­ber 30, 2018, will be paid in the nor­mal course on De­cem­ber 14, 2018.

Gran­ite views its div­i­dend as a valu­able com­po­nent to its busi­ness strat­egy and stake­hold­ers, and is com­mit­ted to its re­in­state­ment when prices war­rant and a more bal­anced sup­ply-de­mand pic­ture im­proves in­dus­try sta­bil­ity. In the in­terim, the Com­pany will re­di­rect this cap­i­tal to debt re­pay­ment to en­sure preser­va­tion of the Com­pany’s bal­ance sheet and fur­ther im­prove Gran­ite’s strength go­ing for­ward.

Risk Man­age­ment

In the first quar­ter of 2019, Gran­ite has 800 bbl/d of oil hedged at an av­er­age price of ap­prox­i­mately $85.85 CAD com­pared to a fourth-quar­ter 2018 av­er­age of 1200 bbl/d at $72.68 CAD (as­sumes an ex­change rate of $0.77 CAD/USD). The Com­pany is also re­ceiv­ing im­proved pric­ing rel­a­tive to WCS mar­ket prices as a re­sult of its di­rect-to-re­fin­ery sales agree­ment. This agree­ment has the added ben­e­fit of en­sur­ing the Com­pany’s ac­cess-to-mar­ket when many pro­duc­ers are fac­ing in­creased pipe­line ap­por­tion­ment and as­so­ci­ated pric­ing risks.

Outlook

Gran­ite con­tin­ues to po­si­tion it­self to take ad­van­tage of more pos­i­tive mar­ket con­di­tions. The Com­pany has in­dus­try-lead­ing cap­i­tal ef­fi­cien­cies and op­er­at­ing costs, which in de­pressed price en­vi­ron­ments will out-per­form peers. Gran­ite also cur­rently has ap­prox­i­mately 200 bbl/d of oil pro­duc­tion shut-in which is be­ing re-pres­sur­ized by the Com­pany’s EOR scheme. This pro­duc­tion can be brought on-stream quickly, when ap­pro­pri­ate, to take ad­van­tage of im­proved prices for no in­cre­men­tal cap­i­tal. The Com­pany has the flex­i­bil­ity to act quickly and will ad­just its cap­i­tal pro­gram and al­lo­ca­tion of free cash flow ac­cord­ingly to max­i­mize share­holder value.

Man­age­ment and the Board would like to thank the em­ploy­ees and share­hold­ers of Gran­ite for their on­go­ing com­mit­ment to the Com­pany. We will con­tinue to man­age these chal­leng­ing times to en­sure the Com­pany’s share­hold­ers ben­e­fit over the long-term.

We seek Safe Har­bor.

Kevin An­drus, Bren­dan Richard Car­rigy, Martin James Cheyne, Michael Lyle Ka­banuk, Bradley Blair Porter, Kathy Tur­geon

(GXO) Shares: 34,190,652

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