At the time of writing, Whitecap Resources (TSX:WCP), a mid-cap company operating in Canada’s oil and gas sector, is still paying a dividend. Though one must wonder how such a distribution will be possible in the future, should the near-term volatility in commodity prices indeed become pervasive and lasting.
A number of analysts point to levels at which Whitecap should be able to maintain its dividend yield. The consensus generally is that sub-US$50 WTI oil, this company may be in danger of making cuts, or eliminating the distribution altogether.
Looking at current WTI prices, the situation remains clear, and I would expect most companies like Whitecap to continue to cut capital expenditures, dividends and buybacks to zero to shore up cash as production slows and the North American energy complex grinds to a halt.
Any company that remains high, levered to the price of commodities (Whitecap is just one of many such North American companies) is far too risky a bet, in my view, right now, especially considering the fact we have no idea how long this Saudi-Russia oil conflict will continue, and how long truly rock-bottom oil prices will be here.
My advice to oil investors right now is to only focus on the largest and most well-capitalized players, if you must, and generally steer clear of this entire sector until the dust settles.
Invest wisely, my friends.