Jack Yetiv

Penn West Energy Distributes High Income Rate to Shareholders

THIS APPEARED ON ZACKS.COM TODAY:

Penn West Energy Trust
By Tracey Ryniec
Jun 19, 2008

Penn West Energy Trust is finding plenty of cash in oil and natural gas as crude prices remain near record highs. The company has a dividend yield of 12.10%. Penn West has surprised on estimates three out of the last four quarters. Its forward P/E is 11.34.
Full Analysis

Penn West Energy Trust (PWE) is the largest conventional oil and natural gas producing income trust in North America. The company, headquartered in Calgary, operates throughout Western Canada. Half of the company's daily production is in natural gas.


Penn West, a Zacks #1 Rank (Strong Buy), engages in low-risk exploitation and development drilling, oil sands development in the Peace River Oil Sands area and, in conjunction with third parties, exploratory drilling. The company has an undeveloped land inventory of about 4.1 million net acres.

On May 21, Penn West announced they were acquiring Endev Energy Inc. for $170 million. Endev Energy shareholders will get trust shares. Endev's current production is 78% natural gas and 22% light oil and natural gas liquids. The acquisition will add 3,500 barrels of oil equivalent per day to Penn West's production.

Penn West Increases Production in the First Quarter of 2008

On May 6, Penn West reported first quarter earnings that missed on analysts' estimates by 60.71%, or 34 cents. Net income was $78 million, or 22 cents per share, compared with $127 million, or 53 cents per share, in the fourth-quarter 2007, which included $106 million of one-time future income tax recoveries related to tax rate reductions. Analysts had expected 56 cents per share.

Production increased 50% from the fourth-quarter 2007 to an average of 192,291 boe per day in the first quarter of 2008 compared to 128,024 boe per day in the fourth quarter of 2007.

The company is forecasting its capital development budget for the year at $960 million, including $60 million for the Peace River Oil Sands.

Production guidance is calling for volumes to average between 195,000 and 205,000 boe per day for the rest of the year.

Consensus Estimates Rise for the Quarter and the Year

Consensus estimates have been rising in the last 30 days for both the second quarter and the year as crude and natural gas prices remain elevated. For the second quarter, estimates rose five cents a share to 80 cents from 75 cents per share. For the year, consensus estimates increased 17% to $2.88 from $2.46 per share.

Penn West Announces Dividend of 34 cents per unit

The company's Board of Directors recently announced the distribution level of the Trust's dividend would remain at 34 cents per unit for the months of May, June and July due to current high forecasts of commodity prices and the company's projected production levels. PWE's current dividend yield is 12.10%.

Penn West's forward P/E is 11.34. Its price-to-book is 1.05, under the industry average of 2.47. Year-over-year earnings growth estimates for 2008 are up 323.53%.

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As I have written in my articles and comments in SA, I agree with the STRONG BUY. I'm looking for PWE to hit $40 after earnings are announced on Aug 7, and to hit $50 before the end of this year.

Jack