PWE - Penn West Petroleum

[doc75]

I don't know the author of this article, but it seems he posts basically the same article on Penn West every few days.  Here's the latest:

 

http://www.fool.ca/2014/10/10/penn-west-petroleum-ltd-avoid-this-value-trap/

 

 

[zippy1]

http://finance.yahoo.com/news/penn-west-announces-355-million-103500113.html

Penn West Announces $355 Million Non-Core Asset Disposition

CALGARY, Oct. 23, 2014 /PRNewswire/ - PENN WEST PETROLEUM LTD. (PWT.TO) (PWE) ("Penn West", the "Company", "we", or "our") is pleased to announce that it has signed an agreement to sell non-core assets located in south central Alberta for expected proceeds of approximately $355 million to a private company. The assets are currently producing approximately 7,500 barrels of oil equivalent ("boe") per day (weighted approximately 80 percent toward natural gas and natural gas liquids).  The disposition represents less than five percent of the Company's proved and probable reserve base, estimated at December 31, 2013, to be 625 million boe. Subject to the satisfaction of customary regulatory and other closing conditions, the Company expects the transaction to close in early December 2014. CIBC World Markets Inc. acted as financial advisor to Penn West on the transaction.

 

The sale provides attractive sale metrics of approximately $47,000 per flowing barrel. The disposition further reduces Penn West's well bore count by approximately 2,250 gross wells, which is expected to have a favourable impact on the Company's asset retirement obligation. These assets are considered non-core to Penn West and were not allocated any current or future development capital under the Company's long-term plan.

 

Dave Roberts, President and CEO commented, "Following closing of this sale, Penn West will have completed over $1 billion in asset sales within the first year of our long-term plan. Further, as a result of these combined divestments, a favourable commodity price environment early in the year and strong operational improvements, we will have reduced our debt position by over $1.2 billion during that same period – a positive step forward in our improvement story. In November 2013, the Company announced a plan to reduce its debt through the disposition of non-core producing and non-producing assets in the range of $1.5 to $2.0 billion. We are now directing our disposition efforts to non-producing assets as we continue to increase the focus on our core areas and improve our financial flexibility through a considerably stronger balance sheet."

OUTLOOK

 

Including the impact of this disposition, Penn West reiterates 2014 production guidance of 101,000 – 106,000 boe per day, weighted approximately 66 percent to oil and liquids. However, the Company now expects full year average volumes for 2014 to be above the mid-point of this range, reflecting better than expected performance and reliability in the Company's base production and strong performance in new production growth from development programs in each of its three core light oil areas.

 

Commenting on the current crude oil environment, Penn West's Chief Financial Officer, David Dyck, stated, "Consistent with our view that a reasonable long-term price assumption for crude oil is in the US$85 per barrel range, we built our long-term plan on an US$87.50 per barrel price assumption for 2015, 2016 and 2017. As we continue to improve on our operational execution capability in each of the Company's core light oil areas, we are confident that our long-term plan is intact and generates rates of return as expected in the current commodity and foreign exchange environment."

 

This outlook section is included to provide shareholders with information about the Company's expectations as at the date of this release for, among other things, 2014 production guidance and readers are cautioned that the information may not be appropriate for any other purpose.

[sampr01]

Hi Uccmal

 

What's your take on the Sale of Assests

 

Thanks

[Uccmal]

Hi Uccmal

 

What's your take on the Sale of Assests

 

Thanks

 

Dont really know what to say.  The market cap is around 2.3 -2.5 B depending on your currency.  They sold 350 million worth of assets allegedly equal to 5% production.  This suggests to me that in a private sale the whole is worth 7b which is roughly book value.  Of course there is still the debt so conservatively the market value of the whole would be 5.5 B. 

 

The debt should be closing on 1.5-1.6 billion with the asset sale plus cash flow.  There is the dividends too.  The market is expecting a cut.  I dont believe there will be a cut barring catastrophic price plunges in O&g.  The annual dividend payout is only about 0.40 per share after the DRIP is accounted for. 

 

I broke one of my own rules and sold a small number of $5.00 puts at 1.80 and 1.85 - 2016s.  If these get put to me they stock will be at 3.20, which would be insanely cheap on an asset basis. 

[sampr01]

Thanks Al for youR insight. I am not surprised with PWE due Oil price going down (below $80). Thanks

[xtreeq]

2014 Q3 results are out

http://pennwest.mediaroom.com/index.php?s=27585&item=135234

[MrB]

Hi Uccmal

 

What's your take on the Sale of Assests

 

Thanks

 

Dont really know what to say.  The market cap is around 2.3 -2.5 B depending on your currency.  They sold 350 million worth of assets allegedly equal to 5% production.  This suggests to me that in a private sale the whole is worth 7b which is roughly book value.  Of course there is still the debt so conservatively the market value of the whole would be 5.5 B. 

 

The debt should be closing on 1.5-1.6 billion with the asset sale plus cash flow.  There is the dividends too.  The market is expecting a cut.  I dont believe there will be a cut barring catastrophic price plunges in O&g.  The annual dividend payout is only about 0.40 per share after the DRIP is accounted for. 

 

I broke one of my own rules and sold a small number of $5.00 puts at 1.80 and 1.85 - 2016s.  If these get put to me they stock will be at 3.20, which would be insanely cheap on an asset basis.

 

Uccmal, what is the rule you broke?

[Uccmal]

Hi Uccmal

 

What's your take on the Sale of Assests

 

Thanks

 

Dont really know what to say.  The market cap is around 2.3 -2.5 B depending on your currency.  They sold 350 million worth of assets allegedly equal to 5% production.  This suggests to me that in a private sale the whole is worth 7b which is roughly book value.  Of course there is still the debt so conservatively the market value of the whole would be 5.5 B. 

 

The debt should be closing on 1.5-1.6 billion with the asset sale plus cash flow.  There is the dividends too.  The market is expecting a cut.  I dont believe there will be a cut barring catastrophic price plunges in O&g.  The annual dividend payout is only about 0.40 per share after the DRIP is accounted for. 

 

I broke one of my own rules and sold a small number of $5.00 puts at 1.80 and 1.85 - 2016s.  If these get put to me they stock will be at 3.20, which would be insanely cheap on an asset basis.

 

Uccmal, what is the rule you broke?

 

Hi Mr. B, I sold puts part way into the 2008 meltdown on some big names, and got hit by margin calls.  At one point the broker bridged me so I could buy in some of the puts and free up margin.  Only time I have ever had a margin call. 

 

Not one to learn to rapidly from my mistakes I sold puts on RIM during its freefall.  I reacted a little quicker this time and bailed at a significant loss, but not catastrophic. 

 

So I made a rule not to sell puts which I have just broken.  I think I am on surer ground this time.  I am also limiting myself to a small overall exposure. 

[alertmeipp]

Only two ppl call in for questions.

 

And the trading today  is weak after the call.  Looks like they decided  to put  dividend  over capex in case of weak commodity pricing.  I like that.

 

We are having good management, but needs wti to bounce back  significantly to recap lots of losses

[longlake95]

small add today @ $4.84.

 

LL

[alertmeipp]

small add today @ $4.84.

 

LL

 

What is your take on oil price?

[plato1976]

Folks, naive question:

 

any one calculated how long this sucker can hang on if oil stays at $70?

 

 

small add today @ $4.84.

 

LL

 

What is your take on oil price?

[longlake95]

2015 capital update this morning, here's a few highlights:

 

Consistent message. conservative pricing assumptions -see below. I think the divy is reduced if oil us under $70USD for a prolonged period - say 6 mo. I don't think we see a "v" recovery, but a "hockey stick" recovery (Go Habs!), in oil prices. OPEC meeting coming in a week or so, should be interesting. Russia losing $2B/day with oil under $90. PWT is definitely in the "show me" category by the street. I like the recent inside buying. One little piece of good news and we get a relief rally.

 

• Over $1 billion in asset sales will have been completed after taking into account the additional proceeds of approximately $355 million expected upon the December, 2014 close of the recently announced non-core asset sale;

• Cash costs have come down approximately 23 percent in the last 12 months;

• Drilling and completions costs that were reduced by 30 percent on average per well at the beginning of the Long-Term Plan cycle have been sustained with increasing activity levels;

• Operational improvements, discipline and focused investment have resulted in more reliable production performance to date in 2014 - the Company now expects average volumes for 2014 to be above the mid-point of our guidance of 101,000 - 106,000 boe per day;

• 2014 funds flow is expected to result in a sustainability ratio of approximately 100 percent as compared to initial expectations of a sustainability ratio of 118 percent for 2014.

 

The pricing assumptions upon which the Long-Term Plan is based remain conservative, in our view, and are unchanged from last year's assumptions of C$86.50 per barrel of Canadian light sweet, C$3.69 per mcf AECO, and a C$/US$ foreign exchange rate of $1.04.

 

LL

[tengen]

Thanks to Uccmal for pointing out that Prem Watsa owns PWT and recently doubled his holdings (see http://finance.yahoo.com/news/prem-watsa-buys-ibm-bally-211209491.html).

 

From the article:

Prem Watsa (Trades, Portfolio) added to his holdings in Penn West Petroleum Ltd by 118.24%. His purchase prices were between $6.86 and $9.71, with an estimated average price of $7.87. The impact to his portfolio due to this purchase was 0.01%. His holdings were 34,700 shares as of 09/30/2014.

 

Elsewhere I have read some pundits speculate that Saudi Arabia can hold down oil prices for 2 to 5 years. Colour me skeptical.

[longlake95]

Not with Russia losing $2B/day with oil <90. I've read Saudi needs $85 oil to fund their budget - how long can they last?

[Uccmal]

I know this was linked above but it is worth a read.  Also the presentation associated with it.

 

http://pennwest.mediaroom.com/index.php?s=27585&item=135236

 

They have repeatedly indicated that the dividend is 'safe'.  The payout ratio is 25% right now, before accounting for the DRIP, which reduces the payout. 

 

They indicated that oil at $70 Canadian is where they will start to curb production. 

 

C of Board, CEO, and other directors are still buying as of last week. 

 

As to the geopolitics of the situation it is all bullshit as far as I am concerned.  This baloney has gone on for time immemorial and is impossible to guess. 

 

If prices on these companies get any lower the big money guys will be coming in to buy all or part.

[elevensecsrt4]

Does anyone have any links to the insider purchases. I am not able to find them searching numerous sites for pennwest.  Do you have to search for PWT or PWE? I can't find any info using either?  Thanks in advance

[Uccmal]

Does anyone have any links to the insider purchases. I am not able to find them searching numerous sites for pennwest.  Do you have to search for PWT or PWE? I can't find any info using either?  Thanks in advance

 

My broker provides ink insider rpts.  Canadian.

 

If that is not an option I believe Ink just pulls data from Sedar's websire.

[longlake95]

Uccmal: agreed.

 

Check https://canadianinsider.com/ for recent transactions.

[kfh227]

Prem doubled.  Dang it.  I need to fund my Roth IRA and add to my PWE holding in a tax advantaged account.

[longlake95]

while it's great to see him owning PWT, don't get to excited. It's a tiny, tiny, position. If he backs up the truck, then I'd get excited.

 

LL

[elevensecsrt4]

Uccmal: agreed.

 

Check https://canadianinsider.com/ for recent transactions.

 

Thanks guys I will try em.

[Uccmal]

Prem doubled.  Dang it.  I need to fund my Roth IRA and add to my PWE holding in a tax advantaged account.

 

I don't mean to be rude, but who cares?  That a junior person at Fairfax holds a starter position in Pennwest is of no relevance to its investment merits.

[tengen]

Prem doubled.  Dang it.  I need to fund my Roth IRA and add to my PWE holding in a tax advantaged account.

 

I don't mean to be rude, but who cares?  That a junior person at Fairfax holds a starter position in Pennwest is of no relevance to its investment merits.

 

Misery loves company. :-)

[Uccmal]

Good Article on pwt

 

http://business.financialpost.com/2014/11/21/rocked-by-accounting-scandal-penn-west-has-now-turned-the-corner-ceo-says/?__lsa=56af-8b10