Seeking Alpha
Long only, newsletter provider, oil & gas, small-cap
Profile| Send Message|
( followers)  

Back in early 2010 I decided that it would be wise to get as much exposure as possible to unconventional tight and shale oil acreage. Near the top of my list of companies to own was Penn West Petroleum (NYSE:PWE). I thought that the 6 million acres of land in Canada that Penn West controls would provide tremendous leverage to the oil that horizontal drilling was unlocking.

I've held shares for a couple of years, and other than the dividend the experience hasn't been terribly rewarding.

(click to enlarge)

But things seem to have been turning for the better for Penn West. The most important moves Penn West has made to right the ship though may have happened very recently and involve the individuals at the very top of the company.

It was announced in early May that two legends of the Canadian oil industry have joined the Penn West Board of Directors.

Rick George, freshly retired as CEO and Chairman from Canadian Oil Sands giant Suncor (NYSE:SU) has been named Penn West's new Chairman of the Board. George was appointed CEO of Suncor in 1991 and created billions of dollars in value for shareholders.

In addition to George, Penn West added the former Chairman of another Canadian oil industry giant (Canadian Natural Resources) Allan Markin as co-vice Chairman. Markin was Chairman of Canadian Natural (NYSE:CNQ) for more than 20 years as that company also created billions of dollars of value for shareholders.

Having George and Markin at the top of Penn West was exciting news. What made it even better was the big money Markin pulled out his own pocket to buy shares of Penn West in the open market.

As of 11:59pm ET July 3rd, 2013

Filing
Date

Transaction
Date

Insider Name

Ownership
Type

Securities

Nature of transaction

# or value acquired or disposed of

Price

Jul 2/13

Jun 28/13

Potter, Frank

Direct Ownership

Common Shares

10 - Disposition in the public market

-23,696

$11.04

Jul 2/13

Jun 28/13

Potter, Frank

Direct Ownership

Common Shares

30 - Acquisition under a purchase/ownership plan

1,230

$9.99

Jun 28/13

Jun 26/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

211,200

$11.00

Jun 28/13

Jun 25/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

200,000

$11.23

Jun 21/13

Jun 21/13

Smith, James Cameron

Direct Ownership

Common Shares

10 - Acquisition in the public market

500

$11.60

Jun 25/13

Jun 20/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

275,000

$11.48

Jun 20/13

Jun 19/13

Roberts Jr, David Emmitt

Direct Ownership

Performance Share Unit ("PSU")

00 - Opening Balance-Initial SEDI Report

250,000

Jun 20/13

Jun 19/13

Roberts Jr, David Emmitt

Direct Ownership

Options

00 - Opening Balance-Initial SEDI Report

450,000

Jun 20/13

Jun 19/13

Roberts Jr, David Emmitt

Direct Ownership

Common Shares

00 - Opening Balance-Initial SEDI Report

23,500

Jun 14/13

Jun 13/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

50,000

$11.29

As of 11:59pm ET June 12th, 2013

Filing
Date

Transaction
Date

Insider Name

Ownership
Type

Securities

Nature of transaction

# or value acquired or disposed of

Price

Jun 12/13

Jun 11/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

100,000

$10.75

Jun 11/13

Jun 7/13

Thornton, Jay

Indirect Ownership

Common Shares

10 - Acquisition in the public market

75,000

$10.40

Jun 11/13

Jun 7/13

George, Richard Lee

Indirect Ownership

Common Shares

10 - Acquisition in the public market

75,000

$10.40

Jun 10/13

Jun 7/13

Brookman, George Homer

Direct Ownership

Common Shares

10 - Acquisition in the public market

2,500

$10.40

Jun 7/13

Jun 7/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

100,000

$10.38

Jun 11/13

Jun 6/13

Thornton, Jay

Indirect Ownership

Common Shares

10 - Acquisition in the public market

75,000

$10.40

Jun 11/13

Jun 6/13

George, Richard Lee

Indirect Ownership

Common Shares

10 - Acquisition in the public market

75,000

$10.40

Jun 7/13

Jun 6/13

Shepherd, Robert Louis

Direct Ownership

Options

38 - Redemption, retraction, cancellation, repurchase

-75,000

Jun 7/13

Jun 6/13

Shepherd, Robert Louis

Direct Ownership

Restricted Share Rights

57 - Exercise of rights

-75,000

Jun 7/13

Jun 6/13

Markin, Allan

Indirect Ownership

Common Shares

10 - Acquisition in the public market

55,900

$10.33

By my count that is about 990 thousand shares at prices in and around $11. That is almost $11 million of Markin's own money with the latest purchase just a few days ago on June 28.

Markin's obvious belief ($11 million is belief) in the quality of Penn West as an investment opportunity made the following news a bit confusing:

CALGARY, July 4, 2013 /CNW/ - PENN WEST PETROLEUM LTD. (TSX - PWT) (NYSE - PWE) ("PENN WEST") announces that effective July 5, 2013, Mr. Allan Markin will be stepping down from the Board of Penn West.

On behalf of the Board of Directors, Chairman, Mr. Rick George commented "we appreciate the contributions Al has made to Penn West in the time he was on the Board. We will continue to focus on many of the areas of value enhancement he championed."

Penn West continues to progress its transition plans with the Special Committee of the Board, chaired by Jay Thornton, moving forward on a detailed plan to review company strategy and assets. In addition, the company's new President and CEO, Dave Roberts, is now in place working detailed asset reviews, capital spending plans, personnel optimization and organizational structure.

A week after his last purchase, and only two months after joining the Board of Penn West, Allan Markin is stepping down.

He clearly likes what he saw at Penn West judging by the $11 million he spent on shares. And I doubt that he would invest that kind of cash without expecting to hold those shares for the long term. What the heck is going on?

I have a theory. Markin's former company Canadian Natural Resources is looking at buying Penn West. Markin needs to get clear of what is going on to avoid a conflict of interest given his financial interests in both companies.

The first part of my theory is that Penn West told us back on June 4 that the company was looking at a "Strategic Review" in order to unlock the value of the company's assets:

Corporate Strategic Review
Penn West's Board of Directors will form a Special Committee to explore strategic alternatives. The Special Committee will consider all alternatives to increase shareholder value, including strategic financing alternatives, asset divestments, joint ventures and/or other business combinations. Although strategy review is always an ongoing activity for all companies, we expect this concentrated effort will be completed by year end. "Penn West has many high quality assets but the Company has yet to unlock their complete value. The Board is focused on maximizing value for all shareholders," said Mr. George .

A complete sale of the company would certainly be one way to unlock the true value of Penn West's assets.

The second part of my theory is that Canadian Natural recently said that it is interested in making acquisitions of Canadian energy companies that have been "undermanaged, underexploited and undercapitalized."

Penn West would definitely fit the first two of those descriptions.

Now this is obviously quite speculative on my part, but I think a good opportunity for Canadian Natural which could use more exposure to light oil production. Penn West is an acquisition that is large enough to really move the needle for Canadian Natural whose management team could surely get more out of Penn West's tremendous suite of assets.

Source: Is Canadian Natural Resources About To Take A Run At Penn West Petroleum?