Whitecap Rises to Highest in Three Months on Payout Cut, Growth

  • Oil producer seen as more sustainable with dividend reduction
  • Company now able to grow output more than peers: National Bank

Whitecap Resources Inc. rose to the highest in three months after reducing its dividend and committing more money to oil drilling, as investors reward sustainable growth in the crude market downturn.

Whitecap, an oil producer based in Calgary, gained as much as 11 percent on Monday to the highest intraday level since Jan. 5. The stock was up 8 percent to C$8.82 at 12:38 p.m. in Toronto. Whitecap reduced its monthly dividend by 38 percent to 2.3 cents a share and more than doubled its capital program for the year to C$148 million ($114 million). This better positions the company to benefit from an oil price recovery by investing in profitable growth, Whitecap said Monday in a statement.

Oil companies have been cutting dividends along with spending plans and jobs to survive a crude price slump that has the U.S. benchmark trading more than 60 percent below its mid-2014 high. Whitecap’s dividend reduction sets it apart from competitors by allowing the company to spend on growing faster, exceeding investor demands for more sustainable business models, Brian Milne, a Calgary-based analyst at National Bank Financial, wrote in a research note.

“While the peers generally struggle to meet such investor demands, Whitecap more than just holds production flat through 2017 - they grow,” Milne said.

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