CALGARY, Alberta – PrairieSky Royalty Ltd. (“PrairieSky” or the “Company“) (TSX: PSK) announced today that its Board of Directors has adjusted the Company’s allocation of free cash flow for the balance of the year.
Over the past week global commodity markets have seen unprecedented volatility resulting from crude oil production and pricing policies implemented by global participants, as well as market reactions to the spread of COVID-19. PrairieSky’s Board of Directors has taken decisive action by adjusting the Company’s dividend to a level significantly below its anticipated free cash flow. This decision will afford PrairieSky flexibility as the outlook evolves, while paying a meaningful dividend and building cash on its clean balance sheet.
PrairieSky will move to a quarterly dividend commencing in Q2 2020 with the first quarterly dividend to be declared and paid to holders of record on June 30, 2020. The dividend will be adjusted to $0.24 per common share annually (CDN $0.06 per common share quarterly) for the balance of 2020, which provides investors with a dividend yield significantly below PrairieSky’s free cash flow yield. Based on strip pricing and anticipated lower activity levels for the foreseeable future, the reduced dividend represents a payout ratio below 50%.
Commenting on the change PrairieSky’s President and Chief Executive Officer, Andrew Phillips, stated, “Given PrairieSky’s long duration, low decline cash flow stream, we believe this decision is prudent and provides PrairieSky with enhanced flexibility during a challenging macro backdrop. The excess free cash flow on top of the dividend will allow the Company to make decisions which improve the business on a per share basis. This may include internally funding acquisition opportunities and making incremental share purchases and cancellations under the normal course issuer bid, both of which are consistent with our long-term plan for dividend increases over time.”
PrairieSky also announced today that its Board of Directors has declared a dividend of CDN $0.065 per common share, payable in cash, on April 15, 2020 to shareholders of record on March 31, 2020. The dividend is designated as an “eligible dividend” for Canadian income tax purposes.