CALGARY - Bonavista Energy Corp. (TSX:BNP) is sharply cutting its monthly dividend, saying commodity prices are too low to sustain the current payout.
Calgary-based Bonavista says it plans to cut the monthly dividend to seven cents a share from 12 cents beginning with the Feb. 15 payment to shareholders of record on Jan. 31.
"Despite encouraging signs of recovery in the fall of 2012, North American natural gas fundamentals have deteriorated significantly since that point," Bonavista said in making the announcement after markets closed on Wednesday.
Driven by widespread technological success in the development of natural gas from unconventional reservoirs, the price of North American natural gas has shifted materially lower over the past two years, it said.
"To compound this natural gas supply imbalance, a similar phenomenon has been evolving with the supply of natural gas liquids and crude oil," it added.
Meanwhile, "insufficient export alternatives" mean Western Canada's producers have been exposed to unusually high differential pricing and can expect to continue to experience "excessive pressure throughout 2013 until structural adjustments are realized."
"Notwithstanding the implementation of several initiatives to preserve our prior dividend throughout 2012, current forward commodity prices do not allow for these activities to continue under our dividend plus growth business model," it said.
On the Toronto Stock Exchange, Bonavista Energy shares closed down 26 cents, or 1.81 per cent, at $14.08 Wednesday.