Suspending the dividend allows OXF to add $4,000,000 to their bottom line just this week. Moving forward they will be preserving an additional 20-40 million a year. What hurts a company is paying out a massive dividend it can't afford. Canceling the div is the smartest move I have seen this management team make. No doubt, investors are shorting and dumping shares, but the reality is the company has more profit potential now than it did a week ago.
You call cancelling the distribution a smart move? They have no choice. I guess when a drowning man clutches a piece of driftwood, you'd say he was a wise man for doing it.
They are trying to survive is all. The company was set up to fail right from day 1.
Someone pointed out to me that I posted the very first thread on this MB questioning whether they'd be able to continue to pay the minimum distribution.
This is not a strong buy. It could easily go under and you'd have total losses. It's purely a speculation on higher coal prices. And since coal prices are tied at the hip to NG prices, with winter 2012-13 looking like a dud for the second year in a row, the outlook for better coal prices is not promising for 2013.
I'd note that the same kind of statements were made about CEP when they cancelled their distribution 4 or 5 years ago. Look at CEP since then. The situation is not so different. CEP was created during a time of high NG prices and was dependent on prices remaining high. Similarly OXF came out during a spike in coal prices and could only remain viable if coal prices remained high and increased. If coal prices stay where they are, OXF will struggle to survive.
Well written thoughts here. First, Oxford has been in business since 1985, and managing their bottom line through vacillating pricing disparities is familiar territory. After 35 years in business, I'm going to give them the benefit of the doubt that they know how to get in front of an issue, rather than trying to play catch up. Second, 95% of their coal inventory is already sold under fixed contracted pricing to utilities throughout Ohio, Kentucky, and Illinois, therefore we need not fear any unanticipated price fluctuations for 2013. Finally, CEP is an interesting chart, but I don't see the comparison to OXF. CEP, cut it's dividend back in May of 2009, and was already trading at an all time low prior to the cut (03/27/09, $1.55). The chart shows that CEP, rallied for six months (6/10/09 -01/22/10, $2.16 - $4.84 Per Share) directly after the cut, more than doubling in price. If OXF did the same, todays share price of $3.50 would rally to $7.84 rather quickly. Right now, the shorts are having their fun, but OXF will rally to the upside as quickly as she has come down. Don't panic, bet big!