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Energy Summary for July 18, 2019

2019-07-18 19:10 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery lost $1.48 to $55.30 on the New York Merc, while Brent for September lost $1.73 to $61.93 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.75 to WTI, down from a discount of $11.60. Natural gas for August lost two cents to $2.29. The TSX energy index lost 2.31 points to close at 135.44.

Vermilion Energy Inc. (VET) lost $1.31 to $26.28 on 3.87 million shares, reaching a 10-year low, as confidence in its generous dividend continued to falter. The 23-cent monthly payout represents a daunting yield of 10.5 per cent. Vermilion has had a dividend since 2003 and has never cut it once, a fact that the company takes evident pride in and gives prominent place on its website. President and chief executive officer Tony Marino has also been working hard to soothe investors' nerves, telling a Calgary energy conference just last week that a dividend cut is "not something we're even entertaining." Skeptics are not so sure. This morning, RBC Capital Markets analyst Greg Pardy fretted that Vermilion is becoming "more vulnerable over time" to a dividend cut as gas prices continue to fall. Mr. Pardy noted that Vermilion has some pricing protection thanks to its "diversified exposure to European gas and Brent pricing." For that reason, despite Vermilion's "quite elevated" yield, he is leaving his dividend-per-share outlook unchanged at $2.76 (the current 23 cents monthly) for 2019 and 2020. He nonetheless downgraded the stock to "sector perform" from "sector outperform" and cut his price target to $33 from $40.

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