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Kelly Sutherland competes in the chuckwagon races at the High River Rodeo on June 26, 2012 in High River, Alberta. (Chris Bolin for The Globe and Mail)
Kelly Sutherland competes in the chuckwagon races at the High River Rodeo on June 26, 2012 in High River, Alberta. (Chris Bolin for The Globe and Mail)


Whoa: Pengrowth’s Stampede surprise Add to ...

Pengrowth Energy Corp. rolled out bad news Friday, just as spectators filled the stands to watch the Calgary Stampede’s kickoff parade trot through the city’s downtown. Pancake batter was mixed, mayor Naheed Nenshi was getting ready to saddle up. For an energy company to put out nasty news on the first (official) day of Stampede is the equivalent of a Bay Street bank dumping an ugly press release on Christmas Eve.

“Did they think everyone is stuffing themselves with free pancakes and they wouldn’t notice?” asked Laura Lau, a fund manager at Toronto’s Brompton Funds, 3,000 kilometres away from Calgary’s rodeo grounds. “I guess if I had to put out bad news, I’d put it on that day, too.”

And Pengrowth did, ruining the first day of cowboy Christmas for some investors. The oil and gas company cut its dividend by 43 per cent, dropping monthly payments to shareholders to 4 cents, down from 7 cents.

Pengrowth, once an income trust darling, is suffering from the dent in commodity prices, which hits all of the energy industry. A handful of oil and gas companies recently rejigged their strategies and trimmed budgets,with the market waiting for the next victim. But Pengrowth comes with its own problems, too: a recent acquisition, a balance sheet under pressure, and an expensive oil sands project in the works.

The dividend cut follows Pengrowth’s $200-million (pro forma) budget cut following its acquisition of NAL Energy Corp., a deal which closed in May. “The reduction of the dividend, in conjunction with the capital expenditure reduction and our ongoing hedging programs, should enhance our financial flexibility,” Derek Evans, Pengrowth’s chief executive, said in the company’s statement.

Ms. Lau, however, thinks the NAL Energy acquisition is also weighing on the company, and that it is trying to protect its Lindbergh steam-assisted gravity drainage oil sands project by possibly selling assets which churn out a higher rate of free cash flow.

To be fair to Pengrowth, it wasn’t the only one with suspicious timing this week. Trican Well Services Ltd. edited its second-quarter forecast Tuesday evening, hours after U.S. traders clocked out for Wednesday’s Fourth of July celebrations. The revisions were negative.

“Nobody is being fooled,” Ms. Lau said, commenting on the party poopers.

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