Birchcliff CEO explains 50% dividend cut as

shares tank

Ben Cousins, BNN Bloomberg

The president and CEO of Birchcliff Energy says a drop in commodity prices has led the company to cut its dividend and alter its output projections for 2024.

On Wednesday evening, the company announced it cut its quarterly dividend in half. It also lowered its average output expectations to a range of 74,000 to 77,000 barrels of oil equivalent per day and dropped its cash flow projections for the year to $340 million.

The changes had Birchcliff trading as the worst-performing stock on the TSX as of Thursday morning.

Chris Carlsen, president and CEO of Birchcliff, said the old projections were made in 2021 and 2022 when commodity prices were high, but now that they have come down, the company has had to adjust.

“Looking forward into 2024, our real concern is that commodity prices have significantly weakened off and what we’re not going to do is take on a significant amount of debt that puts the company at risk,” he told BNN Bloomberg during a television interview on Thursday.

“We’re just not going to do that.”

Carlsen said the dividend cut puts makes the payouts “sustainable for the long term.”

“At 40 cents a share, we think we can pay that dividend -- $100 million a year – for the longevity,” he said. “We’re not making dividend decisions quarter to quarter.”

DEFERRED WELLS DUE TO NATURAL GAS PRICES

In August 2022, natural gas was trading at US$9.33 metric million British thermal units (MMBtu).

The price has since fallen to $2.75 as of Thursday morning, according to Trading Economics.

At the time of the high, Carlsen said his company focused on cutting its debt.

“Commodity prices were in great shape and Birchcliff itself was able to pay almost $900 million of debt including our preferred shares,” he said.

Now, Carlsen said the company is focused on cutting its production during this period of low prices, with plans to ramp back up once commodity prices climb.

“We differed 13 wells that were supposed to be drilled in Q2 and come on in weak commodity prices in the summer of 2024,” he said. “We’ll now drill those wells in Q3 and bring those wells on to strong prices into Q4 … we think that’s prudent for 2024.”