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Bonavista Energy cutting dividend almost in half; cites low commodity prices

01/09/2013 07:35 EST | Updated 03/11/2013 05:12 EDT
CALGARY - Bonavista Energy Corp. (TSX:BNP) is sharply cutting its monthly dividend, saying commodity prices are too low to sustain the current payout.

Calgary-based Bonavista says it plans to cut the monthly dividend to seven cents a share from 12 cents beginning with the Feb. 15 payment to shareholders of record on Jan. 31.

"Despite encouraging signs of recovery in the fall of 2012, North American natural gas fundamentals have deteriorated significantly since that point," Bonavista said in making the announcement after markets closed on Wednesday.

Driven by widespread technological success in the development of natural gas from unconventional reservoirs, the price of North American natural gas has shifted materially lower over the past two years, it said.

"To compound this natural gas supply imbalance, a similar phenomenon has been evolving with the supply of natural gas liquids and crude oil," it added.

Meanwhile, "insufficient export alternatives" mean Western Canada's producers have been exposed to unusually high differential pricing and can expect to continue to experience "excessive pressure throughout 2013 until structural adjustments are realized."

"Notwithstanding the implementation of several initiatives to preserve our prior dividend throughout 2012, current forward commodity prices do not allow for these activities to continue under our dividend plus growth business model," it said.

On the Toronto Stock Exchange, Bonavista Energy shares closed down 26 cents, or 1.81 per cent, at $14.08 Wednesday.

Meanwhile, the company said it has completed another "synergistic acquisition" in its Deep Basin area in Western Canada for a closing purchase price of $72.5 million.

"This acquisition is consistent with our strategy of acquiring high quality, multi-zone oil and liquids-rich natural gas assets in a region proximal to existing operations," it said.

And it said its 2013 net capital spending plans remain consistent with prior guidance at $423 million, although it has now incorporated budget adjustments to accommodate about $20 million of development expenditures allocated to the Deep Basin properties just acquired.

"We expect our 2013 capital program will result in average production of between 73,500 and 74,500 barrels of oil equivalent a day, representing a modest increase over prior guidance and resulting in six to seven per cent growth over 2012," it said.

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