CALGARY, Dec. 21, 2014 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") announces that its Board of Directors has approved a reduction to the 2015 capital program to $70 million from $90 million and has amended its dividend policy to reflect a monthly dividend of $0.025 per share (previously $0.06 per share) beginning with the dividend payment for February 16, 2015.
Journey emerged from its IPO in June of 2014 with the strongest balance sheet in their history and these measures have been undertaken in order to preserve this financial flexibility in a period of uncertain and volatile commodity prices.
Rationale for Amending Dividend Policy
Journey's stated business plan is to provide shareholders with a total return comprised of the combination of dividends and growth. The long term sustainability of the business is critical to this plan. President Alex Verge comments, "Journey's primary focus is on maintaining a solid balance sheet that is reflective of a lower debt to cash flow ratio than our peers. The adjustments to capital spending and dividends are prudent decisions given the current commodity price environment. We are committed to providing a meaningful dividend, but the protection of our balance sheet is of paramount importance." Journey's initial dividend was set at 20-25% of forecasted 2015 cash flow. The recent collapse in crude oil prices necessitates a recalibration of the 2015 cash flow forecast and a corresponding adjustment to our dividend policy. Journey has based our amended dividend level on current 2015 strip pricing assumptions of US $58.50 per barrel for WTI and CDN $3.25 per gigajoule for natural gas. Journey will continue to review its dividend policy and adjust for material deviations, positive or negative, in these assumptions.
In response to the current and near term outlook for commodity prices, Journey's 2015 exploration and development capital program has been revised downward to approximately $70 million. For the first quarter of 2015, capital spending will be adjusted from the previously guided $32 million to $20-$25 million. Despite this reduction in capital expenditures, Journey is currently forecasting maintaining production at the current levels of 11,000-11,300 BOE/d. The Company is also forecasting improved capital efficiency in its 2015 capital program resulting from higher capital allocations to drilling and completions and reduced capital allocations to water flood and facility expansion projects. The Company is also anticipating cost reductions in drilling, completions and well servicing due to reduced industry activity. This production level represents an 8% increase over 2014 levels and a 5% increase over pro forma post IPO production of 10,600 BOE/d.
Journey continues to provide our shareholders with the opportunity to participate in both our Dividend Reinvestment Program ("DRIP") and our stock dividend program. Journey forecasts DRIP and stock dividend participation levels in excess of 25% for the near term.
Journey is in an enviable position as we operate over 90% of our capital projects and since our efforts are concentrated in high working interest pools delineated by producing vertical wells, we have a low-risk portfolio of opportunities without significant lease expiry issues. We control our pace of development, and any projects removed from 2015 can be deferred to future years when commodity prices have rebounded. It is also important to highlight that Journey's 2015 guidance contains no component for growth through acquisitions. However, 2015 may present unique acquisition opportunities for companies with superior financial flexibility such as Journey.
Normal Course Issuer Bid
Journey announces that it intends to implement a normal course issuer bid ("NCIB") through the facilities of the Toronto Stock Exchange ("TSX") pursuant to which Journey would be able to purchase up to approximately 1.9 million of its 43.3 million common shares outstanding for a one year period at prevailing market prices. The NCIB is subject to approval of the TSX and if approved would be subject to the rules and restrictions of the TSX relating to normal course issuer bids. The Company believes that, from time to time, the current trading price is not reflective of the underlying value of the Company. Therefore, the repurchase of shares for cancellation may be used by the Company as a way to enhance shareholder value.
ABOUT THE COMPANY
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey's strategy is to provide investors with growth plus a sustainable yield by focusing on drilling its existing core lands, implementing water flood projects, executing on accretive acquisitions and growing its production base. Journey seeks to optimize its legacy oil pools through the application of best practices in horizontal drilling and, where feasible, with water floods.
Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the final long form prospectus of Journey dated June 12, 2014 (the "Prospectus"). Forward-looking information may relate to our future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, dividend policy, long-term objectives and the declaration and payment of dividends. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective cash flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. No assurance can be given that the expectations set out in the Prospectus or herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
Barrel of Oil Equivalents
Where amounts are expressed in a barrel of oil equivalent ("BOE"), or barrel of oil equivalent per day ("BOE/d"), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term BOE may be misleading particularly if used in isolation. The BOE conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
SOURCE: Journey Energy Inc.