PWE - Penn West Petroleum

[Eye4Valu]

Think the oil patch makes for good end of year tax loss selling pressure?

[plato1976]

I begin to cut some of my CHK holding and convert it to PWE

Still a small position but it's growing...

 

This is all oil price driven for now.

 

The market is so focus on bad news right  now. It is unreal.

[jawn619]

Remember when Buffett said buying Berkshire Hathaway was his biggest mistake? I can't help but see the similarities. We have a company that is selling at .20 book value, That has loads of debt with no moat and is not profitable. This is far from a wonderful company selling at a fair price. With all that said, i'm in...

[undervalued]

How much allocation does anyone putting into PWE? I haven't jump in PWE yet because I already have SD and XCO which already made to 5% of my portfolio.. It's only worth about 2% now lol. At this point, I am not sure what they're going to do. I can't believe how much oil price has affected natural gas companies. If I jump into PWE, I will take it as a speculative bet like buying a 2016 option.

[EliG]

The Very Bearish Case for Canadian Natural Gas

 

Canadian natural gas prices could drop by well over half in 2015 as new pipelines allow very cheap Marcellus gas to flood North America says a November 4 report by Canadian brokerage firm Macquarie Securities.

 

The report–titled Red Dawn–says Marcellus gas could displace western Canadian gas in Ontario, the Midwest and even the US west coast–forcing Canadians to accept huge discounts in their gas prices just to be able to sell their natural gas at all.

 

31% of PWE revenue is from natural gas.

[Uccmal]

Think the oil patch makes for good end of year tax loss selling pressure?

 

I would say that is what we are in the middle of right now.  Everything must go!

 

I even sold some 2016 $7.00 Leaps at a big loss.  No sense holding onto them when I can get rid of my tax bill.  On Pwt itself I am mostly sitting tight now. 

 

Looking to see when other better companies really go on sale: ARX, BNE, TOG, MTL, if they do. 

[Uccmal]

Remember when Buffett said buying Berkshire Hathaway was his biggest mistake? I can't help but see the similarities. We have a company that is selling at .20 book value, That has loads of debt with no moat and is not profitable. This is far from a wonderful company selling at a fair price. With all that said, i'm in...

 

Oil companies have all sorts of advantages that a textile manufacturer never had/has.  The product is always in demand.  At the right price there are assets here, and constant production that is selling. 

 

[thepupil]

How much allocation does anyone putting into PWE?

 

no more than that which you can afford to lose completely. for some, that is 0, others 50 bps, others 1000 bps. i'm at 1.5%.

[Hawks]

0%  Will stick to the majors like XOM.

[meiroy]

Its tax-loss selling season. Anyone with brains is going to dump by the end of the month & buy it back in Feb after the year-end results are announced. Take your loss now, & get your tax refund in April.

 

Oil is at $70, & there is talk of it going down to $55 or less. Cold lifting costs in most parts of the patch are $40-60/bbl, & there is no economical pipeline or rail tanker space to allow additional throughput to lower fixed costs/bbl. Some of the wells are going to get shut in, & probably for quite some time. To survive, the industry will be cutting Capex to the minimum.

 

IFRS requires MTM accounting on joint ventures and minority investments. In the current environment, most MTM adjustments are going to be negative, and they are going to pass through the year-end income statement. Headline stuff, and all negative.

 

Old management probably capitalized a number of marginal wells, which could be either expensed or mothballed according to the

specific economics. Most would take the big bath approach, expense whatever they could into the crappy year-end, and take depreciation & amortization savings from Q1 onwards.

 

O/G has been buoyant for a long time, & there is a lot of denial out there. If management opts to 'bath', it is highly likely that they will also cut the div and reduce the Capex as well - to spread the pain. This thing pays .56/yr (278M/yr) in dividends, & is yielding 16%. If you had bought at higher prices your crux is that high yield; cut it & the support collapses.

 

If they do all this & oil suddenly starts rising again; PWE is going to have a lot of free cash again, no obligation to pay dividends, and a dirt cheap stock price. What are the odds they elect to buy back some of their 490M+ shares.

 

As has already been pointed out, they are going into the perfect storm - but it hasn't hit yet. We can see that it looks like being an evil bastard, but details have to wait until it actually hits.

 

So ... why would anyone not expect this to drop another 30-40% when the sh1t hits the fan?

 

SD

 

May I ask why you were invested in this or similar companies in the first place? What takes it out of the too hard pile. It does seem like oil will remain at the 55 levels as you say, in the longer term at least. Where would these companies be then? At the minimum assets written down significantly, book is not really what it shows for whatever it's worth.  Does not look to me even close to blood on the street level to be worth investing in,  but I have been wrong before so good luck to you guys. It is interesting to watch though :)

 

[SharperDingaan]

We think PWE will still be around in 12 months, & that it offers a good long term possibility of running up 5-6x. The bummer is that we will have to pay with devalued $C, & the same things that make PWE rise will make the $C appreciate. After 15% appreciation we're only looking at a 4-5x gain.

 

We liked it at $5-6, & like it more today - but we're not going to touch it until after the patch starts reporting year-end numbers. We have a loss on the long portion of our hedge, but if we covered today we would be net positive. We just don't see any real reason why we should cover at this point. Its all about the risk.

 

SD

 

[thepupil]

We have a loss on the long portion of our hedge, but if we covered today we would be net positive. We just don't see any reason why we should do at this point. Its all about the risk.

SD

 

Can you explain this? You have a "loss on the long portion of your hedge"?  What does that mean? Are you long options? If so which? How are you structuring the trade? Thanks.

[ERICOPOLY]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

[muscleman]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

[ERICOPOLY]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

 

Good news for GM I suppose.  People will all want big trucks again after oil goes down like that for two years.

[Uccmal]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

 

Good news for GM I suppose.  People will all want big trucks again after oil goes down like that for two years.

 

Stupid is as stupid does. 

[ERICOPOLY]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

 

Good news for GM I suppose.  People will all want big trucks again after oil goes down like that for two years.

 

Stupid is as stupid does.

 

Funny you say that!  My mother always said that too.

[Uccmal]

Its a saying of Forrest Gump.  Your mom sounds like a character....

[ERICOPOLY]

Its a saying of Forrest Gump.  Your mom sounds like a character....

 

Hmm...

[gary17]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

 

Good news for GM I suppose.  People will all want big trucks again after oil goes down like that for two years.

 

I think people will want better cars... So that means more efficient cars like Tsla.  It's good if our enviroment is cleaner - not having to breathe poor air quality -  we are so spoiled on the west coast...  places like China and many parts of Asia are so polluted. 

 

I wonder if cheap oil prices is a form of deflation - now that things will be cheaper. 

 

 

 

[ERICOPOLY]

From 10,000 feet, I just see an oscillating pattern of oil driven by oversupply and undersupply.  I see people justifying high prices when they are high, and low prices when they are low.  I know that high prices create oversupply and that leads to low prices, and then I see that low prices leads to undersupply that leads to high prices.

 

Low prices frees up money that boosts the economy, and then the economy adjusts and later gets shocked by the inevitable dawn of higher prices.

 

I buy PWE in a small amount because it will swing a lot on higher prices which is a hedge on the rest of what I own that doesn't respond well to oil price shocks.

 

I fear I am too early but a 70+% decline already seems impressive.  It could become a 90+% decline but I don't know when the Saudi's will cut production.

 

I have no confidence to add to my position yet that started at around 2% of net worth and is now 1.5%.  I need more time to settle in, get anchored, and make up a narrative that I believe in.  Otherwise, I'll probably just sell some common to buy calls after it makes large further drops.  But not yet.

 

I wonder if something like the US nat gas would happen to oil. It sounds much less likely though, because oil is a global product but US nat gas is restricted for export.

 

Good news for GM I suppose.  People will all want big trucks again after oil goes down like that for two years.

 

I think people will want better cars... So that means more efficient cars like Tsla.  It's good if our enviroment is cleaner - not having to breathe poor air quality -  we are so spoiled on the west coast...  places like China and many parts of Asia are so polluted. 

 

I wonder if cheap oil prices is a form of deflation - now that things will be cheaper.

 

It's about as deflationary as cutting both consumer and business taxes at the same time.

[enoch01]

So this company is trading at what kind of normalized PE today?

[redwood]

FilingDate  TransactionDate  Insider Name  Ownership Type  Securities  Nature of transaction  # or value acquired or disposed of  Price 

Dec 11/14  Dec 11/14  Byrdson, John  Direct Ownership  Common Shares  10 - Acquisition in the public market  50,000  $2.29

USD 

Dec 11/14  Dec 10/14  Byrdson, John  Direct Ownership  Common Shares  10 - Acquisition in the public market  100,000  $2.32

USD

 

[SharperDingaan]

thepupil.

 

We hold a long core position, 50% of which was sold off just ahead of doing the brewing gig. That sale was a synthetic short (short leg) that hedged the position at the sale price. The remaining 50% is the long leg. When we buy the sold stock back in, the hedge lifts, our average cost drops, & we get a cash gain equal to the difference in price x amount sold. We can keep the cash, or reinvest it in additional shares.

 

Zero borrow cost, zero call risk, tax loss (usually), positive carry, & we sit on a block of cash while the world goes to hell. Difficult for many as it means being long (long-term) AND short (short-term) AT THE SAME TIME; it also means having the ability, & discipline, to sit on cash for extended periods.

 

We used to use Leaps & cash, now we prefer to work the physical side.

 

SD

 

 

[plato1976]

Anyone had a glimpse of the PWT debt? Is it distressed?

 

So this company is trading at what kind of normalized PE today?