Cardinal Energy is getting it right
No more hedges, excellent results, new dividend
I have held 25,000 shares of Cardinal Energy (CJ.TO) for a few months and was disappointed in Q4 2021 when the company took a bath on its hedge book. I told the company they should end that practice. While I am sure I had no role in their decision, they soon announced the end of hedges.
Cardinal’s Q1 2022 was a record. Adjusted funds flow of CAD$86 million more than covered their capital expenditures of CAD$36 million with the surplus paying down debt to CAD$147 million, less than one times cash flow. Further debt reduction is planned with the company expecting to meet its CAD$100 million debt target in Q2 2022 and continue to pay down debt thereafter, but introducing a CAD$0.05 monthly dividend along the way beginning in July 2022. That CAD$0.60 annual dividend rate is more than 8.5% of the current share price modestly below CAD$7.00 a share (but likely not for long) and the stock is undervalued and in my opinion comprises good value any where below CAD$10 a share.
Cardinal will consider a higher dividend rate once the remaining debt is repaid, likely in 2023.
The company’s low decline rate of about 10% implies low capital outlays are needed to sustain output, and the recently acquired landholdings in the prolific Clearwater play add some speculative appeal.
I like the name. I may add to my 25,000 shares tomorrow.