Thanks as always for your expertise and Merry Christmas to everyone at 5i.
Oil and gas companies need to be looked at somewhat differently. The book value mostly stems from oil and gas reserves. But, unlike other industries, there can be significant cost to unlocking those reserves (via drilling and well completion). Under certain conditions (inflationary cost pressures, lower oil prices, environmental costs and issues, taxes/royalties) some companies will not develop all of their reserves. Thus we would see book value as much less useful as an indicator within the energy sector. Price fluctuations also change the value of these reserves significantly on a regular basis, and often companies will write off reserves. As of BIR's Sept 30 report, its debt was about nine months of cash flow. It is in good financial shape. 12-month payout ratio was just less than 50%. BIR raised its dividend sharply in January 2023, so the 12 month report (and payout ratio) to September only includes three quarters of dividends at the new rate. Still, BIR has the capacity to keep paying its dividend, barring a complete disaster and drawdown in commodity prices. But investors are clearly worried (13.7% yield) and in no way should our comments be construed as a guarantee. Often, companies will cut dividends anyway if yield is high, as their stock is 'suspect' with such a high yield. Still, it has only been 11 months since the dividend was raised. In November BIR stated that its 2024 forecast would fully cover the dividend AND planned capital expenditures.