Vancouver, British Columbia, December 12th, 2019. Newport Exploration Ltd (“Newport” or “the Company”) is pleased to report on proposed corporate policy with respect to dividend payments to be made to shareholders of record in 2020 and beyond, together with a summary of Management’s strategy.
Quarterly Cash Dividends to Commence in 2020
Going forward, Management proposes to pay a quarterly ‘fixed distribution’ dividend of $0.01 per share commencing in March, 2020, with subsequent dividend payments every three months. Notwithstanding their recent success and aggressive exploration and development plans proposed by Beach Energy Ltd (“Beach”) for the Western Flank and Cooper Basin for FY2020, with the uncertainty that currently exists in the global oil and gas sector, the Company considers it prudent to fix the quarterly dividend at $0.01 per share. The Company reserves the right to increase the dividend payment from time to time. Sufficient funds will be retained in the treasury to maintain the dividend schedule in the event that royalty receipts are reduced for any reason.
Newport’s Dividend Performance Since 2015
The following summarizes the Company’s dividend performance since 2015;
During the year ended July 31, 2015, the Company paid a dividend of $0.10/share to shareholders of record as at April 2, 2015. The average share price for the year was $0.39, which resulted in an Annual Yield of 26%. Earnings Per Share (“EPS”) for the year was $0.03, for an Annual Return of 333%.
During the year ended July 31, 2016, the Company paid a dividend of $0.10/share to shareholders of record as at June 23, 2016. The average share price for the year was $0.26, which resulted in an Annual Yield of 39%. EPS for the year was $0.02, for an Annual Return of 500%.
During the year ended July 31, 2017, the Company paid a dividend of $0.05/share to shareholders of record as at June 30, 2017. The average share price for the year was $0.27, which resulted in an Annual Yield of 19%. EPS for the year was $0.03, for an Annual Return of 167%.
During the year ended July 31, 2019, the Company paid a dividend of $0.05/share to shareholders of record as at October 12, 2018. The average share price for the year was $0.29, which resulted in an Annual Yield of 17%. EPS for the year was $0.06, for an Annual Return of 83%.
During the current fiscal year (July 31, 2020 yearend), the Company has already paid a dividend of $0.06/share to shareholders of record as at September 25, 2019. The average share price from August 1, 2019 to December 9, 2019 was $0.32, which resulted in a Yield of 19%.
Newport’s dividend payout ratio, being the cash dividends per share of common stock divided by the earnings per share of common stock, compares favorably with that of other yield stocks and the Company has paid out more than 85% of after tax royalty receipts in dividends. Furthermore, the dividend payments have been covered by free cash flow with no dilution, incurring no debt, and without selling any assets.
Investors are cautioned that historical results are no guarantee of future performance.
Management believes that stability, profitability, and paying shareholder dividends has been a responsible corporate strategy and recognizes that the Company’s ability to pay over the long term is very important to existing shareholders and potential investors. The proposed dividend strategy will enable the Company to retain a margin of safety to maintain dividend distributions in the event of any sector downturn.
Management will continue to search for and identify other potential assets for acquisition but refuses to rush into buying anything just for the sake of it; this disciplined approach has resulted in market-beating returns in the long run compared to most other Canadian royalty paying energy stocks in recent years.
The Company has an advantageous business model with a Gross Overriding Royalty (“GOR”) over permits in the Cooper Basin, Australia, with strong technical fundamentals and with excellent operators in Beach.
The Company has built in exposure to significant potential growth at zero risk to shareholders as there is no time limit or expiry date on the GOR assets, and no cost to retain them.
Management believes that based on the recent exploration success and development of the licenses in the Cooper Basin over which the Company has its 2.5% GOR, (Company News Release dated October 29th, 2019), shareholders will be rewarded with dividend continuity, potential dividend growth, as well as capital appreciation. Also, the Company’s strong balance sheet ensures that the Company has the ability to maintain regular quarterly dividend payments with a reduced likelihood that the proposed quarterly dividend payout would be cut during any sector downturn.
As stated previously (Company News Release dated March 6th, 2019) Management has maintained its 100% interest in the Chu Chua copper-gold deposit in Central British Columbia, Canada, and continues to believe that it will pay off for the Company and its shareholders as a result of entering into a joint venture to develop it, or by way of an outright sale, or by a corporate carve-out to a separate company for cash and/or shares. In Fiscal 2018 the Chu Chua project was impaired in accordance with International Financial Reporting Standards (“IFRS”). Proposed technical work on Chu Chua for 2019 has been deferred. However, Management continues to believe in the merits of the property and is prepared to continue with the Company’s existing strategy and wait for better market conditions in the sector.
Potential Takeover / Asset Sale
The Company reported (Company News Release dated March 6th, 2019) that it was aware of rumors of a possible bid for the GOR and/or a possible hostile takeover attempt of the Company as a way of acquiring the GOR. No formal offer for the GOR was made. As shareholders are aware, hostile activist campaigns are increasingly ‘homing in’ on companies with valuable assets to acquire, cash flow to dispose of, and businesses to separate. Management and Directors control approximately 36m shares (35%) of the Company and these shareholdings align the interest of Management with all shareholders and should reassure shareholders and potential investors that Management is able to secure the long-term interest of all shareholders and not succumb to corporate predators hungry for quick returns. Management is confident that the majority of shareholders would support the Board in order to safeguard the Company’s treasury, its assets, future cash flows, and shareholder dividends. Any offer, hostile or otherwise, for the Company and/or its assets, would be subject to an independent fairness opinion and shareholder approval.
In summary, Management propose to retain the Company’s several GOR oil and gas assets in Australia as well as the Chu Chua copper-gold asset in Canada, and believe that stability, profitability, and paying shareholder dividends has been a responsible corporate strategy. The decision to move dividend payments to a quarterly dividend schedule going forward improves on this strategy.
With the aggressive drilling and development program planned by Beach for both oil and gas permits, (Company News Release dated 29th October, 2019), and Beach’s planned increase in production from Ex PEL 91 over which the Company holds its 2.5% Gross Overriding Royalty (Beach News Release dated August 19th, 2019), the Company anticipates continuity of production and associated royalty revenues.
The Company continues to strongly encourage shareholders and potential investors to access information released independently by Beach and Santos Ltd to keep current during exploration, development and potential production of all the licenses subject to the Company’s GOR.
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Cautionary Statement on Forward-Looking Information
This news release is intended to provide readers with a reasonable basis for assessing the future performance of the Company. The words “believe”, “should”, “could”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and similar expressions identify forward-looking statements. Forward-looking statements may pertain to assumptions regarding future dividends, the price of oil and fluctuations in currency markets (specifically the Australian dollar). Forward-looking statements are based upon a number of estimates and assumptions that, which are considered reasonable by the Company, are inherently subject to business, economic and competitive uncertainties and contingencies. Factors include, but are not limited to, the risk of fluctuations in the assumed prices of oil, the risk of changes in government legislation including the risk of obtaining necessary licences and permits, taxation, controls, regulations and political or economic developments in Canada, Australia or other countries in which the Company carries or may carry on business in the future, risks associated with developmental activities, the speculative nature of exploration and development, and assumed quantities or grades of reserves. Readers are cautioned that forward-looking statements are not guarantees of future performance. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those acknowledged in such statements.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable laws.