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Penn West (PWE -4.2%) shares plunge after posting a Q3 loss and revenues fell 2.4% Y/Y. PWE's...

Penn West (PWE -4.2%) shares plunge after posting a Q3 loss and revenues fell 2.4% Y/Y. PWE's weighting to liquids production reached a new high of 66% vs. 63% in the year-ago quarter. Average production for the first nine months of 2012 was 163,635 boe/day vs. 161,171 boe/day a year ago. Q3 capex was $405M vs. $481M a year ago.
Comments (14)
  • Bob Carl
    , contributor
    Comments (258) | Send Message
     
    The loss was attributable to unrealized hedging losses.

     

    I have a small position in this un-loved mid-sized Canadian oil producer. I think it is undervalued.
    2 Nov 2012, 10:47 AM Reply Like
  • Uncle Pie
    , contributor
    Comments (3659) | Send Message
     
    PWE hasn't earned its cost of capital for five years, according to Morningstar, and they are in the process of selling a chunk of their properties to pay down their heavy debt load. At a recent presentation, the management was "tight-lipped" about which assets would be sold, to whom, or whether the dividend could be maintained at the current level, according to the UBS analyst who attended.

     

    No position in PWE
    2 Nov 2012, 12:15 PM Reply Like
  • saratogahawk
    , contributor
    Comments (2480) | Send Message
     
    I like at this price and will keep adding here.
    2 Nov 2012, 02:25 PM Reply Like
  • dernpets
    , contributor
    Comments (19) | Send Message
     
    I like at this price too; but may wait to add.
    2 Nov 2012, 02:37 PM Reply Like
  • WestEndDividend
    , contributor
    Comments (207) | Send Message
     
    saratogahawk,
    I follow you on seadrill and others. You don't feel management is screwing this up? I know from reports that they have no intention of decreasing the dividend unless Edmonton oil (not WTI) goes below 65$
    Do you feel the dividend is still safe?

     

    I have a position in PWT (TSX listed)
    2 Nov 2012, 02:55 PM Reply Like
  • saratogahawk
    , contributor
    Comments (2480) | Send Message
     
    Westend. I follow PWE and the other Canadian oils as you know if you follow me. Nothing is ever certain. Here's what we know. They own lots of acreage for development. They have significant proved and provable reserves in ground. Oil may go up and it may go down over the short haul but over the years it is heading up. Canada and North America generally is so much more stable than so many other resource areas that I want to own what I know won't be taken away by some irrational government. Once any of the LNG projects make serious construction headway at Kitimat the Edmonton discount will disappear and it will be WTI/Brent thereafter. The values offered by petronas, CNOOC, etc show that the Canadian oils are undervalued on the world market. Management is making good strides in moving towards a liquids heavy production profile. Natual gas is gradually drifting upward and may well make $5 mmBtu by next year.

     

    Hey, if you own INTC (one of the best blue chips ever) you have lost 30% in the last year. Will INTC go back up. Yup.

     

    So if I can lose money over the short run in a blue chip like INTC sure I can lose money in the short run on an oil stock. Do I believe the PWE story? Yup and I get an 8% dividend while I wait. Lets see I can be in a piece of crap bond paying nothing and likely to pay nothing for a very long time or I can take a little risk, get a dividend (oh and get a DRIP discount to boot), and wait for a big shift back into oils. It will happen.

     

    Hope none of this sounded sarcastic in anyway but just trying to show you how I view the world of oils. I am long PWE, ERF, PBA, PGH, APA, RIG, SDRL, ESV, LGCY and probably more but my head hurts thinking about the election.

     

    West, I sure would like to hear your thoughts if you want to respond. I try to learn by listening. Not always the best at it as my wife often reminds me.
    2 Nov 2012, 03:49 PM Reply Like
  • WestEndDividend
    , contributor
    Comments (207) | Send Message
     
    saratogahawk,
    I really appreciate your comments, the basic picture looks the same to me. I read the investor presentations, and I just don't see oil going below 65$ a barrel (Edmonton) for any length of time. It's getting harder to find, not easier. My problem is I am young, and although I have lived in Edmonton for most of my life, surrounded by the industry, I don't know it as well as I should as an investor. for instance, when a hedging strategy fails, as it seems to have done here recently for PennWest, I don't really know what to make of it.

     

    I have SDRL, KMI, ERF and PWE. Not really worried about small paper losses to date, but trying to decide if now is the time to spend my cash on upping PWE right now (I try to keep ~10% cash for great opportunities. Its so hard to compare the chance I have now (PWE) with what may come in the future (elections, "fiscal cliff" fear, etc). In fact, I have been wanting in on LNCO or KMR, but fear overpaying for them in general. I don't earn that much, so I can't save quickly either, perhaps making a 2-3 $1000 tranches available as each year passes, and buying when opportunity arises. The opportunity has to be good to spend all my cash, though, so I am feeling wishy washy now.

     

    My last good choice, in my opinion, was getting SDRL for 32$ and AT (ATP.TO actually) for 13$. happened at nearly the same day and both look good for now. Has to be a deal on that level to get my attention.

     

    That said, I have found my best moves so far (only 1.5 year investing history so far) to be on the sell side: ex: I managed to unload some PWE I had this past spring at 20.70 or something, felt like a genius when it dropped! I suppose I should be looking back to why I bought any PWE in the first place. I tend to get in too quickly, then when I know the company, I buy more at a great price, so far only with PWE was I able to move my higher cost basis shares back to the market.

     

    Folks like Uncle Pie above are what give me pause, primarily because I am not as confident as I could be. I think it is alright to fear overconfidence though :)
    2 Nov 2012, 05:59 PM Reply Like
  • bill d
    , contributor
    Comments (1906) | Send Message
     
    Div only thing keeping me around. Wish I had more Pembina. After the rectal job the Canadian gov did to me I no longer turn my back on them - keep both eyes open
    2 Nov 2012, 06:20 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (3659) | Send Message
     
    Penn West down about 11% more in the last two trading sessions.
    Their debt to cash flow is about 2.9X, a worrisome level, which is about double the level of its peers. They are still not saying much about their attempts to sell assets to reduce debt. With these issues, the dividend is clearly at risk.

     

    No position in PWE. Already took my loss. Much better opportunities available in Canadian energy. Look at Arc Resources, Bonavista, Crescent Point, Canadian Oil Sands Ltd., Baytex, Vermilion, Cenovus, Suncor, eg. Long all of these.
    5 Nov 2012, 12:52 PM Reply Like
  • saratogahawk
    , contributor
    Comments (2480) | Send Message
     
    I don't think you will find much relief for the moment in many of the Canadian oils. Several of pie's longs above aren't doing much better. Nat gas pricing and the Canadian oil discount from WTI/Brent pricing hurts these guys right now. However, that is when I want to buy. I am not happy about PWE but I am confident that it has the holdings to be a very good longterm investment and I am buying at these levels. The debt level is not an issue for me. Its getting the right mix of liquids and nat gas for hedging. They have made good progress switching to liquids and I expect that to be reflected in earnings reports going forward. PWE is about midrange in cost of production and has really excellent land holdings that I expect will be productive for years to come. Hard to see BTE as any better when it is 15 points off its 52 week high.
    5 Nov 2012, 02:06 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (3659) | Send Message
     
    excuse me? BTE is up about 5-fold in the last 8 years.
    6 Nov 2012, 08:46 AM Reply Like
  • Donadog0
    , contributor
    Comments (35) | Send Message
     
    The Chinese invested a lot of money in PWE awhile back and I'm wondering if that has had an effect on how low this is going? I have gone in and out of PWE and ERF since these stocks were in their 30/40s and am really concerned about these low price levels at this point in time....I would like to continue adding to PWE but don't know how low it could go.
    5 Nov 2012, 03:22 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (3659) | Send Message
     
    Four of PWE's top management people are out the door this morning.
    The rats are leaving the sinking ship!
    6 Nov 2012, 08:43 AM Reply Like
  • saratogahawk
    , contributor
    Comments (2480) | Send Message
     
    Quite the contrary they were removed effective immediately. It appears that management has heard the shareholder shouts about the poor earnings report. Interesting that the press release seems to stress dividend maintenance. In spite of the problems I really like PWE's land holdings. They have plenty of areas to divest and still focus on the core holdings. This recent $1.3 billion divestiture focuses the capex in the core and reduces the debt significantly.
    6 Nov 2012, 10:29 AM Reply Like
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