Davy V. Bui

Penn West Energy Needs to Show Investors Its Worth

Thanks for the comments. BTW, I respond much faster if comments are posted to my blog as I check that more often. A few responses:

1. No significant updates on Pembina or Peace River. Management did say that Peace River needs a lot more infrastructure build-out. Sounded like it'll be awhile before unitholders see anything, especially with the shift away from the long-term projects.

2. As for the outlook on nat gas + oil, I'm as bullish as anyone else -- just read some of my other posts on my blog or here on SA. However, investing in stocks exposes one to management and execution risk. To ignore this risk is foolish and dangerous; at the very least, you have opportunity cost.

3. Steve, please don't bring up Crescent Point! That was my preferred trust but for some reason or other, I didn't open a brokerage account at Interactive Brokers and I steer away from pink sheets so I get to kick myself now as CP doubles. PWE hasn't performed horribly relative to the broader market or even to some of the major integrateds, once distributions are included but opportunity cost does hurt.

4. Jack, according to their 2007 year-end report, the majority of 2008 hedges have ceilings @ ~$79 WTI and ~$7.50 AECO. As for future prices, I expect higher prices in the long-term but anything can happen in the short-term. The summer season usually means some weakness in nat gas prices but who knows these days?

Management's projections do leave room on the upside if prices stay at current levels but don't forget that CEO Andrews lowered guidance across the board just from Q3 2007 despite record prices. What if production lags or operating costs spike which has been more norm than exception for at least the past year? Nevertheless, they should meet current guidance (easily, you suggest). If they don't, unitholders, at least this one, may wonder if management can deliver and I think the distribution may be considered at that point if they keep having to use debt to cover some of the distribution.

I'm long the stock so I'm hoping Andrews & co. will make it happen. Let's see what they say next month.