CALGARY, Alberta – After reporting dismal Q2 results, and with its short-term outlook shaping up to be even worse towards year-end, executive management at Barelington Resources has devised a capital fundraising program that is sure to make analysts and industry observers alike shake their heads.
The Calgary-based senior producer is planning to introduce a precedent-setting Negative Dividend Program (NDP) that it believes will enable it to raise capital without incurring any additional costs. The company’s CFO, Ms. Rusty Kuntz, explains the strategy at a press conference along Calgary’s Stephen Avenue Mall,
Was our production down in Q1 and Q2? Yes. At $267 per barrel, did we overestimate oil prices for budgeting and long range planning purposes? Yes. Do we need to be creative to raise capital for 2015? Why, certainly – and that’s my job.
In our new NDP, we will multiple our stock dividend payout by negative 1, effectively turning that monthly payout into a healthy income stream. Considering our current 47% dividend yield, my calculations show that by the end of Q4 2014, we should have raised more than enough money to fund our 2015 and 2016 capital programs. From a financial math point of view, it’s really that simple. – Ms. Rusty Kuntz, CFO
According to information dug up by 2P News financial reporter Daveed Nillass, Barelington Resources has a questionable history of financial reporting and fundraising activities. In January, 1999, when a barrel of WTI crude traded for a piddly $17.20, the company, then run by Barry Bunns, reported selling its crude for $80 per barrel to a third-world company that was not aware of prevailing commodity prices.
One of Barelington’s senior corporate accountants was charged with fraud over $5000 in 2003 after investigators uncovered that she was responsible for masterminding a sophisticated penny-skimming scheme at the local Starbucks Coffee shop.
Energy analysts believe Barelington’s Negative Dividend Program is equally dubious, and that it may land the company in a class-action lawsuit with investors, not to mention a significant sell-off of the company’s stock. One investor does not believe that it can even work.
How the hell can Barelington possibly think that multiplying its dividend by -1 will make money flow the other way? Do they honestly think that by doing so, dividend money will be withdrawn from my account every month rather than being deposited in it? Come on. Those idiots need to go back to Accounting 101 and get things straight. – Andy Killinger, curious investor
A spokeswoman for Barelington defended the NDP by saying that it has historically adjusted its dividend by multiplying it by a growth scaling factor. “In this case, the scaling factor that we chose is negative, and there’s nowhere in the Alberta Security Commission proceedings that states that it has to be positive.” – Cindy McMuffstuffer, Barelington spokeswoman.