investor-man Posted September 22, 2015 Share Posted September 22, 2015 I just wrote investor relations asking (basically plagiarized FB's comment) above. Hopefully I'll hear back, and I'll post the response. Did you get an answer? Thanks Hey I should have posted an update - no I never heard... very suspicious :) I heard through the grapevine that it was sold, but I can't give any convincing evidence to you, and full disclosure - I am just some guy with no insider knowledge and no connections to the industry. Link to comment Share on other sites More sharing options...
investor-man Posted September 22, 2015 Share Posted September 22, 2015 also, I have a request: the Penn West board that Nawar posts to was taken over by psychotic trolls and went private. If anyone has access to that board, will they please post updates here? TIA Link to comment Share on other sites More sharing options...
jmp8822 Posted September 22, 2015 Share Posted September 22, 2015 also, I have a request: the Penn West board that Nawar posts to was taken over by psychotic trolls and went private. If anyone has access to that board, will they please post updates here? TIA Post today from Nawar on private board: Thank you for the kind words. I am glad that my actions and Adam's actions have had a real positive impact on people's life. As in regards to the conformation bias, I am indeed keeping this in check, this is why my oil price expectations have been moderate and this is why I have adjusted my Penn West valuation lower over the last few quarters. It is indeed extremely dangerous to live in a bubble of sorts where contradictory information is not welcome. Despite the headwinds, I continue to believe that Penn West will emerge from its current malaise through a combination of asset sales, cost cuts and some support from a general improvement in oil prices. I am also very pleased to learn that the CEO is not counting on high oil prices to drive the success of this company, this is from an email exchange I have had with him about oil prices few days ago: The fundamentals are more constructive than most realize, but it will be the cost leaders who thrive in the next phase of the great game as price won’t be the enemy but neither will it be a savior. Once Dave manages to get the balance sheet in shape, I believe the strength of the company core assets and its competitive cost base will shine through. Having said that, this will be a relatively slow and long process that will likely take another year before we are fully on solid ground. Link to comment Share on other sites More sharing options...
Packer16 Posted September 22, 2015 Share Posted September 22, 2015 Hi, Packer: do you own any of these names? Thanks! I am not pessimistic per se but when you can get companies that have better capital efficiency at prices that are at or lower than Penn West why invest in Penn West. Wilson has mentioned BXE (which is a combination of an asset with comparability to some of Penn West' better properties and on of the best asset in the Spirit River) but there is also Gear, RMP and Bonavista in the WSB and Southwestern and Antero in the Utica/Marcellus. All of these have much better capital efficiencies and are growing production per share, except Bonavista who is flat. If you listen to Ken Peak's last interview on Bloomberg he clearly states that low cost is the way to go to reduce risk in O&G as you have no influence on pricing. He also practiced that it doesn't take alot of folks to do this correctly. One way to look at the people issue is to calculate production per employee. Contango has about 250k boe/d/employee. From list above, I think Gear, RMP and Antero, along with Peyto, clearly fit into the Ken Peak type companies. BXE is on its way there. Both BXE and Sothwestern do have alot of employees versus other Peak type companies. Peyto is very expensive versus the other three but Peyto has a nice track record that the others do not have at this time. Interestingly enough his three area of investment were offshore GoM, the Piceane in Colorado and the WSB in Alberta, some of the lowest cost geographies out there. Packer I own BXE, Gear and RMP at this point. Packer Link to comment Share on other sites More sharing options...
Wilson-TPC Posted September 22, 2015 Share Posted September 22, 2015 Hi, Packer: do you own any of these names? Thanks! I am not pessimistic per se but when you can get companies that have better capital efficiency at prices that are at or lower than Penn West why invest in Penn West. Wilson has mentioned BXE (which is a combination of an asset with comparability to some of Penn West' better properties and on of the best asset in the Spirit River) but there is also Gear, RMP and Bonavista in the WSB and Southwestern and Antero in the Utica/Marcellus. All of these have much better capital efficiencies and are growing production per share, except Bonavista who is flat. If you listen to Ken Peak's last interview on Bloomberg he clearly states that low cost is the way to go to reduce risk in O&G as you have no influence on pricing. He also practiced that it doesn't take alot of folks to do this correctly. One way to look at the people issue is to calculate production per employee. Contango has about 250k boe/d/employee. From list above, I think Gear, RMP and Antero, along with Peyto, clearly fit into the Ken Peak type companies. BXE is on its way there. Both BXE and Sothwestern do have alot of employees versus other Peak type companies. Peyto is very expensive versus the other three but Peyto has a nice track record that the others do not have at this time. Interestingly enough his three area of investment were offshore GoM, the Piceane in Colorado and the WSB in Alberta, some of the lowest cost geographies out there. Packer I own BXE, Gear and RMP at this point. Packer The three cheapest companies with the best bang for the buck. Link to comment Share on other sites More sharing options...
influx Posted September 23, 2015 Share Posted September 23, 2015 Hi, Packer: do you own any of these names? Thanks! I am not pessimistic per se but when you can get companies that have better capital efficiency at prices that are at or lower than Penn West why invest in Penn West. Wilson has mentioned BXE (which is a combination of an asset with comparability to some of Penn West' better properties and on of the best asset in the Spirit River) but there is also Gear, RMP and Bonavista in the WSB and Southwestern and Antero in the Utica/Marcellus. All of these have much better capital efficiencies and are growing production per share, except Bonavista who is flat. If you listen to Ken Peak's last interview on Bloomberg he clearly states that low cost is the way to go to reduce risk in O&G as you have no influence on pricing. He also practiced that it doesn't take alot of folks to do this correctly. One way to look at the people issue is to calculate production per employee. Contango has about 250k boe/d/employee. From list above, I think Gear, RMP and Antero, along with Peyto, clearly fit into the Ken Peak type companies. BXE is on its way there. Both BXE and Sothwestern do have alot of employees versus other Peak type companies. Peyto is very expensive versus the other three but Peyto has a nice track record that the others do not have at this time. Interestingly enough his three area of investment were offshore GoM, the Piceane in Colorado and the WSB in Alberta, some of the lowest cost geographies out there. Packer I own BXE, Gear and RMP at this point. Packer The three cheapest companies with the best bang for the buck. @packer, wilson: What is the investment horizon for these three for you and what kind of return you expect/happy with? I am aware I am hijacking this thread abit with this and I apologize. Link to comment Share on other sites More sharing options...
influx Posted September 23, 2015 Share Posted September 23, 2015 btw, what do you think of PWE stock consolidation (reverse stock split), say 5:1 as a solution for their NYSE delisting problem? I am kind of bear on that as a solution. I generally dont like. Link to comment Share on other sites More sharing options...
Uccmal Posted September 23, 2015 Share Posted September 23, 2015 btw, what do you think of PWE stock consolidation (reverse stock split), say 5:1 as a solution for their NYSE delisting problem? I am kind of bear on that as a solution. I generally dont like. Delisting as a problem? I would think its an asset. It certainly is for an other heavily shorted companies. It was the best thing that ever happened to FFH. The argument that PWT needs a Us listing to get financing is no longer relevant in more ways then one. No one is going to loan them money or buy into a stock dilution. Capital flows across borders so much more easily than even a few years ago. Link to comment Share on other sites More sharing options...
influx Posted September 23, 2015 Share Posted September 23, 2015 btw, what do you think of PWE stock consolidation (reverse stock split), say 5:1 as a solution for their NYSE delisting problem? I am kind of bear on that as a solution. I generally dont like. Delisting as a problem? I would think its an asset. It certainly is for an other heavily shorted companies. It was the best thing that ever happened to FFH. The argument that PWT needs a Us listing to get financing is no longer relevant in more ways then one. No one is going to loan them money or buy into a stock dilution. Capital flows across borders so much more easily than even a few years ago. basically what I am asking is "what is the most shareholder oriented solution?" according to you folks for PWE regarding the PWE delisting issue? Link to comment Share on other sites More sharing options...
Cardboard Posted September 23, 2015 Share Posted September 23, 2015 As Uccmal hinted: you delist. You save money on expensive NYSE listing fees and there is no problem continuing trading as is on the TSX. Americans have no respect for penny stocks so might as well trade as a pink sheet. I doubt that many U.S. institutions are still holding, so for retail it makes little difference to trade on the NYSE or over the counter. And for institutions who do hold Penn West notes, they do not trade them on the NYSE anyway. Finally, if Fairfax at its size (market cap, debt, preferreds) can easily obtain competitive financing being listed only on the TSX, then I think that Penn West can do just that as well. Cardboard Link to comment Share on other sites More sharing options...
Uccmal Posted September 23, 2015 Share Posted September 23, 2015 As Uccmal hinted: you delist. You save money on expensive NYSE listing fees and there is no problem continuing trading as is on the TSX. Americans have no respect for penny stocks so might as well trade as a pink sheet. I doubt that many U.S. institutions are still holding, so for retail it makes little difference to trade on the NYSE or over the counter. And for institutions who do hold Penn West notes, they do not trade them on the NYSE anyway. Finally, if Fairfax at its size (market cap, debt, preferreds) can easily obtain competitive financing being listed only on the TSX, then I think that Penn West can do just that as well. Cardboard Its not like anyone is going to give them financing right now anyways, nor do they want it. Link to comment Share on other sites More sharing options...
Cardboard Posted September 23, 2015 Share Posted September 23, 2015 You might get surprised ;) Cardboard Link to comment Share on other sites More sharing options...
SharperDingaan Posted September 23, 2015 Share Posted September 23, 2015 We are of the same view; delist - but also use the opportunity to consolidate at roughly 2:1. It will be a lot easier to restore a dividend with fewer shares outstanding, & commodities do turn. When they do - that same demand over a much smaller float will make PWT much more upwardly volatile. What is not to love. SD Link to comment Share on other sites More sharing options...
goldfinger Posted September 25, 2015 Share Posted September 25, 2015 Hi, Packer: do you own any of these names? Thanks! I am not pessimistic per se but when you can get companies that have better capital efficiency at prices that are at or lower than Penn West why invest in Penn West. Wilson has mentioned BXE (which is a combination of an asset with comparability to some of Penn West' better properties and on of the best asset in the Spirit River) but there is also Gear, RMP and Bonavista in the WSB and Southwestern and Antero in the Utica/Marcellus. All of these have much better capital efficiencies and are growing production per share, except Bonavista who is flat. If you listen to Ken Peak's last interview on Bloomberg he clearly states that low cost is the way to go to reduce risk in O&G as you have no influence on pricing. He also practiced that it doesn't take alot of folks to do this correctly. One way to look at the people issue is to calculate production per employee. Contango has about 250k boe/d/employee. From list above, I think Gear, RMP and Antero, along with Peyto, clearly fit into the Ken Peak type companies. BXE is on its way there. Both BXE and Sothwestern do have alot of employees versus other Peak type companies. Peyto is very expensive versus the other three but Peyto has a nice track record that the others do not have at this time. Interestingly enough his three area of investment were offshore GoM, the Piceane in Colorado and the WSB in Alberta, some of the lowest cost geographies out there. Packer I own BXE, Gear and RMP at this point. Packer The three cheapest companies with the best bang for the buck. I strongly disagree with that statement. PWE is trading at around 28k to 30k/BOE where most of its competitors trade at more than 50K-60K/BOE and competitors focused on PWE's core acreages trade at in between 75k/BOE and 120k/BOE. It is because of the past, the debt and so on... I do not know how you calculated all this stuff... There is no cheaper oil company than PWE at this time... What's going on at PWE is very very dynamic. They have adapted their strategy multiple times this year as the crisis was unfolding. Now they are on a re-focus around core acreage, spend only funds flow and divest assets at a reasonable prices as much as possible in case oil prices stay low for a long time strategy. The core acreage is profitable at these prices as evidenced by sept 2015 presentation numbers... Not many NA producers can say that... Either they can divest most non core assets at in between 500M$ and 1+B$ and reduce their debt to a very acceptable number - 1.3 B$ to 800-M$ or the environment can not swallow asset sales anymore at anything close to reasonable. Up to now they have been able to divest assets at reasonable prices. Mitsue was a 43k/BOE sale and this asset is lower quality compared to the rest of PWE's non core assets... In case they can not divest many more assets in the next year (and similarly oil prices stay that low) they will have to merge the company with a more resilient competitor. If a transaction like that happens, it will probably not be at 28k/BOE! Link to comment Share on other sites More sharing options...
StevieV Posted September 25, 2015 Share Posted September 25, 2015 "In case they can not divest many more assets in the next year (and similarly oil prices stay that low) they will have to merge the company with a more resilient competitor. If a transaction like that happens, it will probably not be at 28k/BOE!" If they can't divest more assets, and are preparing for lower longer, why do they have to sell? If they have to sell, why will they be able to dictate any particular price? If they can't divest individual assets, why will they be able to sell the whole company? Link to comment Share on other sites More sharing options...
Packer16 Posted September 25, 2015 Share Posted September 25, 2015 PWE is no cheaper than BXE, GXE or RMP. Given the recent sale, PWE sells of US$19.49/boe with a declining production profile. BXE, GXE and RMP trade at US$21.13, US$18.17 and US$16.34 with increasing production profiles and much lower debt. PWE's net backs were about CD$18 with a good oil price in 2Q. (Note: BXE, GXE & RMP reported EVs are in CD$ so a conversion rate of 1.333 need to be applied to compare them with PWE if you are using US$ for PWE). I would not be surprised if net back were lower than CD$10 unhedged. The companies above all have netbacks in excess of CD$25 except BXE in their oil fields. For the three you have a great management team or a group of large investors enforcing discipline. IMO the EV/Production numbers of US$70 are gone until oil has a large rally. The best O&G companies like Apache trade at around US$50/boe. PWE might be fine but I think they are at the mercy of their lenders and oil prices rising (where PWE is a like a call option). As to the recent sale, I think that was the only property they could sell at the asking price and if oil prices do not change they will either have to accept lower price or convince the banks to be patient. The other names do not have this banking issue. Packer Link to comment Share on other sites More sharing options...
StevieV Posted September 25, 2015 Share Posted September 25, 2015 Maybe I should clarify my questions, which were meant to be sincere and not rhetorical. Obviously, a lot of oil companies were anticipating higher prices and now have debt and cash flow problems. I haven't done a scientific analysis but, as one might expect, it appears that there are many more companies looking to unload properties than scoop them up. Even a major like COP is divesting assets. Given that backdrop, I think it is a little bit of an unknown as to how effective PWE will be at unloading more assets. I understand that PWE has done a decent job of unloading some assets so far, but I still think it is an open question as to how successful they will be going forward. Apparently you do as well ("In case they can not divest many more assets in the next year..."). I have seen this argument before that if they can't unload enough assets and oil prices don't rise, they will sell the company at a significant premium to today's prices. With the sliding share price, the number necessary for a significant premium keeps dropping. Maybe now we have hit the point where the premium is assured. However, I am somewhat uncomfortable with the notion that they won't be able to sell assets at a reasonable valuation, but will be able to sell the entire company at a significant premium. I believe that the assumption has to do with the nature of the non-core assets the company is trying to unload individually versus the assets contained in the entire company. That is, PWE is trying to sell less desirable non-core assets individually. On the other hand, if they would sell the entire company, that would obviously include their more desirable core assets. So, there could be a market for the whole company (core + non-core) when there is no market for just individual sales (only non-core). I would like to see more discussion of this though as the floor seems to keep falling and the hypothetical company sale price appears to keep falling as well. As some have alluded to, it can be difficult to sell a company at many multiples of the current share price. I am not as familiar as others may be, but is there much precedent for a company selling at 4x its current price (e.g., $2 USD for PWE)? Link to comment Share on other sites More sharing options...
Cardboard Posted September 25, 2015 Share Posted September 25, 2015 What is the need to confuse numbers with currencies when PWT/PWE numbers are available in CDN$? Here are Q2 netbacks fully comparable (excludes hedges or the norm): BXE: $11.92/boe GXE: $25.19/boe PWT: $19.21/boe RMP: $26.57/boe EV/BOE/day (based on Monday`s price): BXE: $29,603 GXE: $25,454 PWT: $27,640 RMP: $27,339 Here are some elements not discussed by Packer that are important to valuation: EV/2P Reserves: BXE: $4.85 GXE: $7.26 PWT: $4.31 RMP: $7.81 Production, % liquids, reserve life: BXE: 41,000 boe/d, 30%, 16.7 years GXE: 5,800 boe/d, 98% (heavy oil), 9.6 years PWT: 83,500 boe/d, 68%, 17.6 years RMP: 12,000 boe/d, 45%, 9.6 years Regarding debt, GXE and RMP are in much better shape but, BXE is highly levered. You can easily come to that conclusion by comparing Net debt/Equity or Net debt/(Annual production x (Netbacks - G&A)). I do feel that we are somewhat comparing apples and oranges while it is true that at the end of the day profitability is what matters no matter how small/big you are or what you produce. However, I want to warn people about smaller companies (juniors) such as GXE and RMP being presented here. I also bought into a junior: Manitok Energy, that looked perfectly fine and well managed (hedged, not drilling now) until they made an acquisition that looked very good but, that turned out to be terribly financed. The turn in fortune with this one is shocking, so while these seem like good companies, keep an eye on them since one bad move can rip them apart. Getting back to PWT, what is also being missed is the optionality within the company. The other three being discussed have 1 or 2 assets/core areas (BXE has more flexibility). PWT has 3 core assets, 6 non-core assets left and the Duvernay. They also have oil batteries, gas plants, connecting pipelines, etc. that these other 3 companies brag about whenever they build or buy one. It would be nice to remind people that Kuwait paid $1.5 billion for a 30% stake in Chevron`s Duvernay on October 6, 2014. A 100% stake in Penn West`s Duvernay would be worth $1 billion at these metrics. It won`t happen now and maybe the rock is not exactly the same, but it just shows how much holdings they have. In the near term, to raise cash quickly and in large amount, they could sell 1 core asset or do a royalty deal on production. The problem is that it hurts the company long term. So with the real issue being current marketability of assets, what they need is time. So far the banks and notes holders have always received their interest on time and have now received $605 million in principal since the March agreement or a year and a half ahead of schedule (only $45 million left out of $650). To put the company into bankruptcy on a covenant breach to accelerate repayments is risky and you lose yield. So my guess at this time is that they will continue working with the company considering that they are cutting cost, living within their means on capex, continuing to sell assets and again have made all payments that a lender can ask for. Cardboard Link to comment Share on other sites More sharing options...
Packer16 Posted September 25, 2015 Share Posted September 25, 2015 In today's environment, the diversification IMO is a handicap if the it includes area with higher costs. When prices are going up it is nice as you are buying the future for cheap today but with flat or declining prices if this diversification is purchased with debt it becomes a problem. This is where IMO management in the choosing of where to drill and driving down of costs is job one. The three mentioned are in low cost areas with declining average costs. The only one in a higher cost area is the oil assets of BXE, where they are no longer drilling. The gas netback of BXE are amongst the highest in the Spirit River. IMO 2P numbers should have a smaller amount of relevance in a non oil appreciating environment. If I was an oil bull (and I was in the 00s), then 2P is really relevant as there is a land grab going on and the pricing reflects that. Now IMO, some of this land is worthless until oil prices rise. BTW the 1Q hedge adjusted field netbacks (with closer oil prices to Q3 than Q2) were about CD$8.35/boe and the operating netback was on CD$1.80/boe. PWE was dealt a bad hand and it appears management is doing what it can with that hand. I would rather buy into a low cost hand here as a margin of safety. If oil prices rebound, PWE will rise more than these others but if they are flat or decline these others will do better. I guess I feel more comfortable with a win no matter what happens. Packer Link to comment Share on other sites More sharing options...
tombgrt Posted September 25, 2015 Share Posted September 25, 2015 These smaller players simply aren't able to catch a break it seems stock pricing wise. Even with oil up a little and energy as a whole flat these guys drop like stones. Any particular reason for this other than size disadvantage? If I figure out whether I'm able to stomach a 50% loss the minute I buy, I might buy a basket of these. I'm just not up to it yet... Link to comment Share on other sites More sharing options...
dutchman Posted September 25, 2015 Share Posted September 25, 2015 Packer, can I ask how big of a position Bellatrix is for you ? (forgive me if im prying :) ) Link to comment Share on other sites More sharing options...
Packer16 Posted September 26, 2015 Share Posted September 26, 2015 The smaller player are just going down for reasons I do not understand. Currently, BXE is 5% and GXE and RMP 2-3%. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted September 26, 2015 Share Posted September 26, 2015 BXE is heavily leveraged not sure if it's a concern for you in this env I probably only want to buy low cost and low leverage oil producers The smaller player are just going down for reasons I do not understand. Currently, BXE is 5% and GXE and RMP 2-3%. Packer Link to comment Share on other sites More sharing options...
Packer16 Posted September 26, 2015 Share Posted September 26, 2015 If it did not have the economics it has in the Spirit River or started oil drilling today, I would be concerned but the economics going forward along with Orange & Baupost provide more comfort. They are in the process of selling non core assets to reduce debt in addition to using CF from Spirit River to reduce debt. The sub debt is trading north of 85 at this point unlike other more stressed names. The other 2 names are much less levered and more attractive to those who do not care for companies with much debt. Packer Link to comment Share on other sites More sharing options...
goldfinger Posted September 26, 2015 Share Posted September 26, 2015 Another post from Nawar illustrating the value of the assets, core, non-core and tax assets: http://screencast.com/t/JnjD1Driqek The fire sale one is quite interesting. :o The potential end result with core assets only is too ::) Link to comment Share on other sites More sharing options...
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