Petrobank Energy & Resources Ltd. fell for a third day after BMO Capital Markets cut its rating on publicly traded affiliate PetroBakken Energy Ltd., 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.