I hate taking losses. But when a line in the sand is crossed, there’s no excuse not to take action. Consequently, I now advise taking our losses in speculative natural gas producer Perpetual Energy Inc (TSX: PMT, OTC: PMGYF).

As I’ve written many times the past several months, we’ve been holding Perpetual over the years for three basic reasons. First, the stock’s a very aggressive way to play a rebound in natural gas prices, which I still think we’ll see eventually. Second, management has always been very up front about its performance and prospects. And third, we’ve been getting some cash while we wait on potential capital gains.

The first two reasons are still quite true. Few stocks provide a more aggressive way to play a rebound in natural gas, and few companies have consistently provided their shareholders such depth of information in a more timely way.

As of Wednesday night about 8:30 ET, however, the company took away our third reason for holding, as management announced it is “suspending future dividend payments until further notice.”

The reason given is disappointing but nothing management hasn’t warned us about in the past: “Continued payment of a dividend is not sustainable given the continued weakness in natural gas prices, and will inhibit Perpetual’s continuing efforts to implement its strategy of commodity and asset base diversification.”

That latter objective has been deemed priority number one for the company for some months, given management’s long-standing belief that natural gas prices will not soon recover. The only question was whether or not gas would stay high enough for them to execute the plan and service debt while continuing to pay dividends. And as it’s turned out the drop to a little above USD3.50 per million British thermal units was simply too much for that to happen. Rather than keep paying out management has chosen the path with the best odds of survival.

As I pointed out in the October Portfolio Update, Perpetual has a fair amount of debt coming due between now and Dec. 31, 2012. That includes CAD74.93 million in a bond maturing Jun. 30, 2012, and a CAD210 million credit tranche on which CAD88.97 million is currently drawn that matures May 29, 2012.

All this will have to be rolled over between now and then. And making this move now will almost certainly be a major plus with the company’s lenders when the time comes. In fact, that was almost surely a major factor behind this move.

Whatever the case, my view is we’re best off taking the loss on this stock and moving on. The line is the sand has been crossed. There are very real questions about debt if natural gas should fall further, and there’s no dividend to reward us for waiting around. Sell Perpetual Energy.