Petrobank Energy & Resources Ltd. (PBG) fell for a third day after BMO Capital Markets cut its rating on publicly traded affiliate PetroBakken Energy Ltd. (PBN), declaring its dividend payout “increasingly unsustainable.”
Petrobank, based in Calgary, fell 24 cents, or 4 percent, to C$6.35 at 4:06 p.m. on the Toronto Stock Exchange after dropping C$2.74, or 31 percent, the previous three days. PetroBakken rose 33 cents to C$6.75 after dropping from C$9.42 Sept. 27.
Petrobank owns 59 percent of PetroBakken, a Calgary-based oil producer, and expects C$105 million annually in dividends at the current per-share payout of 8 cents monthly, according to Petrobank’s Aug. 15 earnings release.
The dividend rate “looks increasingly unsustainable” because PetroBakken is poised to outspend cash flow by C$350 million, Jim Byrne, a Calgary-based analyst for BMO Capital Markets, said in a Sept. 27 note issued after markets closed, cutting the firm’s rating on PetroBakken to “underperform” from “market perform.”
“PetroBakken is paying a dividend that puts their debt at dangerous levels,” Bryne said today in an e-mail responding to a query by Bloomberg. “Petrobank owns about 60 percent of PetroBakken, so the weakness is directly correlated.”
Byrne doesn’t rate Petrobank and doesn’t own stock of PetroBakken.
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