That dividend you just received, I'm more convinced now that it will be reduced or eliminated completely.
Cash and cash equivalents $31,997 Restricted cash $155,925
The same way Miller continually says they can't buy back shares (even though they announced twice that they would) because the cash they have is all restricted, they are going to be unable to pay dividends as they are now in the mode of posting quarterly losses.
The caveats included with the press release for this dividend announcement telegraph what will happen next.
They do not have the cash to continue paying the dividend. If they had more cash, that might change the situation. However, they have nothing to bring in cash to fill the coffers - as a sale of their TGGT stake is clearly not happening. Even if they somehow pull a rabbit out of the hat and do sell some of TGGT, they've said they would pay down their debt...not that what they bring in will make a big dent in the $1.8 billion. I personally doubt they would pay down much of the debt at all - maybe just $50 million or $100 million of it, banking the rest as they would need it for life support.
How much further do you suppose the stock would fall if the dividend were eliminated?
Yes - i think you are fair to assume divvy will have to go for now...in fact, if i was an owner or WR, i would insist the div gets cut....i'd rather have the co. reinvest. Even though its only 36mn, in this environment its survival mode....
the net income will be OK in Q1 because they will mark to market their hedges that don't pay out till later in the year (+30 to 50mn) so they might show a +5-10c quarter - of course, that means that payback later in the year will make earnings -tive if things don't improve...but this doesn't help cash flow....
and, as you say, who cares about earnings, it is cash flow....the money from TGGT, lets say 200, will have go to pay down credit line. The bank redetermination, based on Miller's own statements on how the banks value (60-65% of PV-9 on PDP), would need come down to 1.2 but they will probably cut them slack and use 1.4 and put them on watch for Nov...either way, they will have to pay at least 200mn off to have safety margin.
then you have their own stated 100mn cash flow hole in Q1 - so unless they slash cap-ex, which is hard to do as contracts are in place, or costs, i don't see how u bring that down to zero--maybe u get it to -50....The could sell of more assets (called JVs to us) but then you are destroying future earnings power which is exactly why you buy this stock to begin with...
Bottom Line: I agree that dividend will (AND SHOULD) go and that cash-flow will be tight increasing the risk of a needed capitalization of some sort which is why this is now trading below book-value (ahh book value -> lv that to another msg)