Penn West: Distribution at Risk

Aug.14.09 | About: Penn West (PWE)

Distribution-lovers, beware — Penn West Energy Trust (NYSE:PWE) may soon bring heartbreak. The company pays C15¢ per unit per month, but it does not look as though it will last.

Penn West’s second quarter press release said the board plans to keep it there until November. But then what?

“The distribution will remain at [C15¢] per unit until November, at which time we believe a 50% reduction will be necessary to allow for a meaningful capital program in 2010,” Kam Sandhar, an analyst at Peters & Co. Ltd. in Calgary, said in a research note Wednesday.

Over at Canaccord Adams, Kyle Preston is also calling for a cut, but not tossing out specifics. “Management is sending a clear message that this distribution will likely be cut in the future as they move towards a more growth oriented business model,” the analyst wrote in a note.