You only pay dividends when you have sustainable free cash flow , so in the case of BRK, they would need sustainable production revenue... they are far from that and probably will never get there, even though they will generate significant free cash over and above capital investment from production, and even though they will build a significant cash pile from production.
BRK have never shied away from telling the market the biggest return pathway for shareholders will be share price appreciation... which is proving to require a lot of patience at this time. One has to be cognisant that monetisation is a journey, which begins with undeveloped acreage acquisition, then DSU formation, then HBP drilling which leads to acreage/asset revaluation through reserve certification.... and then finally monetisation through the various options of production, JV, partial or outright asset sale.
Regardless of how big their cash pile can be, they will probably never get there because they are not in the game of continuous development drilling for production over the long therm. Development drilling over the short term is one of the monetisation pathways when commodity prices are high, but their main pathway will be selling PUD's, which will provide significant LUMPS of cash, periodically. If there is to be a shareholder return it will be more likely in the shape of a capital return post a significant asset sale, taking a big bite out of the cash pile.
It may be that the market will not "reward" BRK with a share price revaluation until a significant asset sale is completed, which will then make the value of the assets in the company obvious. To be perfectly blunt, why would anyone invest in BRK expecting a dividend?
BRK are certainly not a "relatively high cost producer".. on the contrary, as most of their production comes from new wells which have significant initial production flows , a strong flush production period of a few months and are close to gas trunk pipelines and oil refineries, their costs are actually very low. Depending on the maturity of their production, individual costs range from US$4 a BOE for the early stage SWISH production, to US$8 per BOE for the more mature non operate STACK production. Certainly not a relatively high cost producer.
As far as the 5-10-15 year outlook, who really knows what the world supply, demand equation for oil and gas will be. In saying that, there is no doubt there is significant underinvestment in the sector globally right now leading to a supply/ demand deficit.... and that underinvestment will increase over that period IMO. BRK, if it is still around in it's current structure in 15 years, will be one of those companies that IS investing in that climate and profiting handsomely, but it won't be a $60 million market cap with DP as its ~70 year old MD
Cheers
Dan
BRK Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
(20min delay)