Executive Peter Scott says the oil company is always looking for opportunity.Rostislav Ageev/Getty Images/iStockphoto
Shares of oil exploration and production business Lightstream Resources Ltd. have tumbled downward this year, and after another lacklustre quarter one analyst is flagging the company as a prime target for activist activity.
"With a long history of poor share price performance, it seems like an opportunity that activists typically look for," said Jim Byrne, analyst at BMO Nesbitt Burns Inc., in a note to clients on Monday. "We believe that without a shift in the company's strategy, investor interest in the name will remain weak."
He backs this up by reminding investors of a similar slump Lightstream endured back in 2011 when it was known as PetroBakken Energy Ltd. The company recuperated by selling some assets, paying debts, and bringing in an experienced name in oil financing: former Dragon's Den star Brett Wilson.
But now many of the same debt and performance issues have returned and Mr. Byrne says a change in course, dividend cut, asset sales "or all of the above are required to get people to look at Lightstream in a 'new light'. Perhaps a nudge from existing or new shareholders could be something to light the fire," he wrote.
Peter Scott, Lightstream's chief financial officer, said the company doesn't comment on analyst reports but did offer some insight into the company's strategic direction: "We're always looking to unearth value from our assets, particularly non-core assets that might not be getting appropriate value in the market place," he said in in a telephone interview. The company operates businesses in B.C., Alberta and Saskatchewan and is focused on light oil.
"Given the nature of the industry, it's hard to predict when anything could happen from a transaction standpoint. But suffice it to say the industry changes, and we're always looking to stay in tune with what's happening in the industry," Mr. Scott said.
Lightstream's shares have dropped 44 per cent in the past year and currently yield about 13 per cent, which indicates the payout may not be stable and investors need to use more caution, as the Globe has previously noted.
Mr. Byrne has changed his estimates to account in a dividend cut of up to 50 per cent beginning in 2014. This would mirror similar cuts made at peer companies such as Penn West Petroleum Ltd. and Pengrowth Energy Corp. in the past year.
Michael Harvey, analyst at RBC Dominion Securities agrees a dividend trim could happen next year at Lightstream. "Given the operating challenges they've had as the year goes on, and into 2014, I think [the dividend] is something they'll continue to evaluate on an ongoing basis."
But Mr. Scott said the company is currently committed to its monthly payout. "We always look at the dividend, and our capital payout and fund flows coming in and out, so it's something we're not blind to. But the long-term plan of the company is to be able to provide some growth as well as a dividend payout," he said.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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