PWE - Penn West Petroleum

[jawn619]

Reducing dividend to .03

 

http://money.cnn.com/news/newsfeeds/articles/prnewswire/CA92378.htm

[redwood]

Why are they getting rid of drip?

[EliG]

Why are they getting rid of drip?

 

Because they don't want to issue equity at distressed prices?

[thepupil]

a little disappointed they didn't cut to zero and the capex cuts may not be enough and the funds flow estimates seem pretty optimistic given how much oil has fallen, but at least they finally acknowledged the game had changed.

 

it will be interesting to see how they fund themselves, in the absence of a big asset sale.

 

did anyone ever look into the bonds?

 

Edit: Also happy to see them kill the DRIP

[Uccmal]

Why are they getting rid of drip?

 

Because they don't want to issue equity at distressed prices?

 

Probably cutting admin costs for now. 

 

They maintained the marginal dividend as a signal that they will reinstate at some point in time.  It also allows them to remain in dividend and pension funds.  For now it is still a TSX -60 company. 

[ERICOPOLY]

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

There is a chance that you'll see something new today.  So far, it's up on divvy cut day.

[Uccmal]

dividend raise? options market already implies a massive cut. If you think they're going to raise and maintain for 2 years, be my guest and buy the put, you'll make a killing.

 

Why is capital return (divvy or buyback) the appropriate action for a levered commodity producer that just saw its commodity drop by 40%?

 

Imagine you were invested in a levered hedge fund..."We have experienced massive mark to market losses and all future additions by existing LP's have been canceled. We've decided that the right thing to do is maintain all our positions and give you back 20% of your remaining capital and get more levered"

 

I'd want to get back 100% of my capital and would think the GP was a nut. When you are too levered and start losing big , you reduce gross: sell longs (oil assets in this instance) and cover shorts (debt in this instance)...you don't want to get a margin call (BK, forced fire sales) and realize losses on the entire portfolio at the bottom.

 

I agree with this analysis. market is saying "phooey" to PWT management, daring it to keep the dividend intact. if he wants the stock to go up he should cut the dividend. show people you're serious about making it through this cycle instead of appealing to widows and orphans in Canada. the company is seen as a distress asset and as long as oil prices stay where they are and the divvie stays where it is, the stock is in trouble imo. this dividend is nothing more than getting your own capital returned to you when the company needs it, if only to prop up perceptions that it's a going concern.

 

btw anybody know the pwt bonds prices at the moment?

 

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

I'm all for new experiences.  ;)

 

I know that all my purchases for the last 3 weeks of Leaps have assumed no dividend. 

 

I have taken an absolute bath on the common.  Got rid of it all in my taxable accounts. 

[Uccmal]

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

There is a chance that you'll see something new today.  So far, it's up on divvy cut day.

 

A jeez, you beat me to it,

[EliG]

For now it is still a TSX -60 company.

 

Not any more. S&P kicked them out on Dec 12. The change goes into effect as of Dec 19 close, if I remember correctly.

[Uccmal]

For now it is still a TSX -60 company.

 

Not any more. S&P kicked them out on Dec 12. The change goes into effect as of Dec 19 close, if I remember correctly.

 

Hmm, My misttake.

[tyska]

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

There is a chance that you'll see something new today.  So far, it's up on divvy cut day.

 

A jeez, you beat me to it,

Hardly fair when they are fortuitous enough to cut the day before oil jumps a couple bucks and all energy stocks are popping ;). I believe LTS fell the day after their cut. Just saw that First Energy has a target price of $.50 on LTS, seems a little drastic. But I doesn't seem that stocks are traded on value or fundamentals any more. Just Energy is having a pop along with energy stocks today and they are more of a utility/consumergoods  retailer.

[ERICOPOLY]

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

There is a chance that you'll see something new today.  So far, it's up on divvy cut day.

 

A jeez, you beat me to it,

Hardly fair when they are fortuitous enough to cut the day before oil jumps a couple bucks and all energy stocks are popping ;). I believe LTS fell the day after their cut. Just saw that First Energy has a target price of $.50 on LTS, seems a little drastic. But I doesn't seem that stocks are traded on value or fundamentals any more. Just Energy is having a pop along with energy stocks today and they are more of a utility/consumergoods  retailer.

 

I posted my comment when oil was down this morning.

 

PWE was up, oil was down.  Now oil is up and PWE's rally has fizzled.

 

[tyska]

You know I have heard that" cut the div. and the stock will rise", or the more common " a div cut is already priced into it". But in my experience I can not think of one stock that has cut the div and didn't tank even more. Some have come back, but over a long time frame.

 

There is a chance that you'll see something new today.  So far, it's up on divvy cut day.

 

A jeez, you beat me to it,

Hardly fair when they are fortuitous enough to cut the day before oil jumps a couple bucks and all energy stocks are popping ;). I believe LTS fell the day after their cut. Just saw that First Energy has a target price of $.50 on LTS, seems a little drastic. But I doesn't seem that stocks are traded on value or fundamentals any more. Just Energy is having a pop along with energy stocks today and they are more of a utility/consumergoods  retailer.

 

I posted my comment when oil was down this morning.

 

PWE was up, oil was down.  Now oil is up and PWE's rally has fizzled.

I know, just hassling the two of you back a little. I see that now down is up and up is down, pretty much sums up the rational in the markets lately.

[Granitepost]

TD Waterhouse has downgraded PWT on Dec 19 with a 12 month target of Can $0.70 from a prior target of Can $6.00.  They now rate it as "speculative" with a recommendation of "reduce". 

[tyska]

TD Waterhouse has downgraded PWT on Dec 19 with a 12 month target of Can $0.70 from a prior target of Can $6.00.  They now rate it as "speculative" with a recommendation of "reduce".

 

So it's right in there with LTS and LTS has hedging in place.

[alertmeipp]

It is comical how these analysts work.

 

They make money when we trade in and out.

[SharperDingaan]

You might want to be careful.

 

TD just put out a price of $0.70, when the market price is $2.33 US. The UW would have been fully aware that they will be severely ridiculed if there is no real basis for it, a significant miss will be a career limiting move for the analyst; & if there was no review prior to the report being released - it evidences a control & competency problem at TD. Most folks don't make these kinds of mistakes.

 

It implies that PWE has around 50-65% of future revenue on the bubble; and at real risk of disappearing within the next 12 months, either through shut-in or sale. ie: ANOTHER round of write-downs in Q1, if prices do not improve somewhat.

 

SD

 

[tyska]

You might want to be careful.

 

TD just put out a price of $0.70, when the market price is $2.33 US. The UW would have been fully aware that they will be severely ridiculed if there is no real basis for it, a significant miss will be a career limiting move for the analyst; & if there was no review prior to the report being released - it evidences a control & competency problem at TD. Most folks don't make these kinds of mistakes.

 

It implies that PWE has around 50-65% of future revenue on the bubble; and at real risk of disappearing within the next 12 months, either through shut-in or sale. ie: ANOTHER round of write-downs in Q1, if prices do not improve somewhat.

 

SD

 

Excuse me if I don't quite understand your thinking on your "significant miss" statement. Is his last price of 6 not a significant miss already. Not having seen any study done on the accuracy of price targets by analyst, but just my observations. It would seem that analysts make weather forecasters look like genius's. In hindsight they always have reasons for being off, who doesn't, but I would think if missed price targets had a career limiting outcome, the turnover must be astronomical. 

[alertmeipp]

You might want to be careful.

 

TD just put out a price of $0.70, when the market price is $2.33 US. The UW would have been fully aware that they will be severely ridiculed if there is no real basis for it, a significant miss will be a career limiting move for the analyst; & if there was no review prior to the report being released - it evidences a control & competency problem at TD. Most folks don't make these kinds of mistakes.

 

It implies that PWE has around 50-65% of future revenue on the bubble; and at real risk of disappearing within the next 12 months, either through shut-in or sale. ie: ANOTHER round of write-downs in Q1, if prices do not improve somewhat.

 

SD

 

I am not saying that PWE won't go to their target price. It might. But look at their target price few months, they don't have a clue back then, and they probably don't have a clue now. Their job is to plug in the current strip prices into a spreadsheet, that's their forecasting. And they ring in 6 figures doing that.

 

CIBC, RBC, Scotia, TD all have different targets, don't waste your time looking at those target prices, the commentary might be more useful.

 

Looks at their house price forecast, it's even more comical.

 

[SharperDingaan]

Even the dullest in the shed don't put out a forecast this far below the current price, without a very good reason. And even if the analyst was expressing sour grapes, the report still got through the screening process. Incompetent analyst AND incompetent screening is pretty unlikely.

 

SD

[alertmeipp]

Even the dullest in the shed don't put out a forecast this far below the current price, without a very good reason. And even if the analyst was expressing sour grapes, the report still got through the screening process. Incompetent analyst AND incompetent screening is pretty unlikely.

 

SD

 

Did you read the report? Do you agree with their assumptions?

[kilroy04]

This might be useful

http://www.investorvillage.com/groups.asp?mb=17622&mn=2021&pt=msg&mid=14486826

 

Edmonton oil in the upper 60's. Total debt covenants.  LTS and PWE are essentially highest in DACF and PWE way up there in payout % estimates based on the new scenario for oil (assuming no rebound).

 

It's starting to look like a leveraged bet and a bet on management's ability to handle that leverage. Don't think it's quite CanWest - but debt service at this level may require the LOC. I'm a bit concerned management has gone from a conservative view of oil prices to now assuming there has been an over sell.  Perhaps that is true but it doesn't seem to be the conservative way to manage capital.  Why not get ahead of the curve and say: no dividend, capital will be allocated to create sustainability in a new environment? If the environment turns out to be temporary there will then be tremendous positive cash-flow for debt reduction.

[Uccmal]

I read the TD report and the Scotia Report.  I always find these things to be way to dependent on plug in numbers and incomprehensible as a result. 

 

The TD report doesn't acknowledge the 355 million asset sale, which closed Dec. 1.  That sale covers the debt due in 2015, if need be, and then some.  Pwt reported in november for The 3rd Q.  There was no indication that there was any weird spending.  A dividend was paid after the 3rd Q (55m).  The price plunge is only 3 weeks into any danger territory.  My read is that the 355 M is still available (i.e. it hasn't been spent). 

 

The Td Report concerns itself with debt needing to be paid off with the Line of credit (1.6 billion available - Sept. 30) ~ around 100 M in use for Lines of credit.  TD seems to think this is a big deal.  To me it is just a bridge until a better financing climate is in place.  I have no idea where they get 0.70 cents from. 

 

The Scotia rpt is more balanced in its approach, and comes up with a target price of 4.xx. 

 

I dont trust that these analysts know more, or even as much as people on this board. 

 

There is a very real possibility of a takeout. 

 

[kilroy04]

perhaps also of interest

http://www.investorvillage.com/smbd.asp?mb=4217&mn=7138&pt=msg&mid=14489145

 

Similar with respect to debt adjusted cash flow and sensitivities to oil price.  They would also prefer management living within cash flow.  While they didn't come out and say it, sounded like they thought the dividend should have been eliminated.  Different prediction on price -  EV/DACF of 6.7 and a discount to peers that get a EV/DACF of 10.

 

Management skill will be important in the coming months.  Agree a takeout is possible.

[kevin4u2]

Even the dullest in the shed don't put out a forecast this far below the current price, without a very good reason. And even if the analyst was expressing sour grapes, the report still got through the screening process. Incompetent analyst AND incompetent screening is pretty unlikely.

 

SD

 

Did you read the report? Do you agree with their assumptions?

 

I read the report and I agree with the assumptions. I will sum it up for those who haven't read it.  There is a chance Penn West may violate their debt convents next year and possibly go bankrupt.  For those who deny that this is a real possibility are demonstrating confirmation bias.  They based their report on $65 WTI for 2015.  TD raised their risk rating to "speculative" from "high". 

 

Asset write downs are coming in Q4, perhaps TD got wind of what's coming.