PENN WEST PETROLEUM (Toronto symbol PWT; www.pennwest.com) is one of North America’s largest oil and gas producers. Its output is 63% oil and 37% gas.
In the quarter ended June 30, 2013, Penn West’s cash flow per share was unchanged at $0.57 from a year earlier. A 14.2% fall in daily output, to 140,083 barrels of oil equivalent from 163,181, offset higher oil and gas prices.
Penn West continues to shore up its finances and take measures to boost its value after it appointed Rick George as chairman and Allan Markin as vice-chairman. George played a key role in building Suncor Energy, while Markin was important to the growth of Canadian Natural Resources.
Energy stocks: Reduced dividend still yields close to 5%
Penn West has now cut its staff by over 25% since the start of 2013. It has also reduced its quarterly dividend by 48.1%, to $0.14 a share from $0.27. The new rate gives it a 4.8% yield. Paying down debt has lowered Penn West’s interest costs and will let it invest more money in its highest-potential oil and gas properties.
The company continues to look at selling more properties to pay down more debt after it sold $1.6 billion of assets in 2012. It could also split into two parts, with one focused on riskier exploration properties that have growth potential and the other on projects with stable production that could support a high dividend.
Penn West continues to hold a range of high-potential oil and gas properties with lots of drilling locations.
In the latest issue of Canadian Wealth Advisor, we look at whether Penn West’s new leadership can successfully execute its new strategy. We also examine whether it can replace the cash flow from the assets it has sold and maintain even its reduced dividend. We conclude with our clear buy-hold-sell advice on the stock.
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Penn West has made a key change in management bringing in two people with strong credentials at their previous companies. Do you have examples of stocks that improved significantly—or receded badly—with a change in management?
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