Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: alertmeipp on January 21, 2014, 07:14:22 PM

Title: PWE - Penn West Petroleum
Post by: alertmeipp on January 21, 2014, 07:14:22 PM
Penn West Provides Fourth Quarter, 2013 Operational Update and Announces Additional Non-Core Asset Dispositions for Expected Proceeds of Approximately $175 Million

http://finance.yahoo.com/news/penn-west-provides-fourth-quarter-213900213.html


Nice to see they can actually get things sold at a fair price. (but doesn't look as good as the previous although this is more gas-weighted)
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on January 22, 2014, 07:04:07 AM
down big on the news. sigh...
Title: Re: PWE - Penn West Petroleum
Post by: phil_Buffett on January 22, 2014, 07:14:23 AM
alltime low as i see. alertmeipp whats your take on this?
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on January 22, 2014, 07:22:38 AM
it doesn't feel great losing money.

they are just executing the plan, buyer today, the company is 500 mills cheapee coz of a 175m transaction

the sale price is not great but those are gassy assets with high cost.
Title: Re: PWE - Penn West Petroleum
Post by: phil_Buffett on January 22, 2014, 07:24:06 AM
it doesn't feel great losing money.

they are just executing the plan, buyer today, the company is 500 mills cheapee coz of a 175m transaction

the sale price is not great but those are gassy assets with high cost.

ok great thanks for your answer. i have no Position. but maybe a will start one. stock is at alltime low
Title: Re: PWE - Penn West Petroleum
Post by: phil_Buffett on January 23, 2014, 04:59:24 AM
alertmeipp if i could you ask for your estimate Intrinsic Value of Pennwest.
would be nice to hear from you.   :)

the market i think is making to much Panic mode. they sell the asset which is not bad for the Company.
Title: Re: PWE - Penn West Petroleum
Post by: xtreeq on January 23, 2014, 05:06:19 AM
For future reference there is/was another PWE thread in the General Discussion area
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/pennwest/
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on April 09, 2014, 06:25:12 PM
Just doubled my PWE leap positions, current holdings are up 50% so far. I think this could be a big winner with the D being put up for sale.
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on May 01, 2014, 05:02:30 PM
Great quarter in my opinion.
They are really executing, makes me want to buy more. Also like they are not hyping asset sales. One day we will have a nice announcement on sales.

http://pennwest.mediaroom.com/index.php?s=27585&item=135216

After selling significant assets CF actually improved due to pricing and $ weakness. This will be a great quarter for Canadian O&G.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on May 02, 2014, 06:36:47 AM
Great quarter in my opinion.
They are really executing, makes me want to buy more. Also like they are not hyping asset sales. One day we will have a nice announcement on sales.

http://pennwest.mediaroom.com/index.php?s=27585&item=135216

After selling significant assets CF actually improved due to pricing and $ weakness. This will be a great quarter for Canadian O&G.

Agreed, These guys are on the ball.  My position is large now.  My problem with buying more is that I cant get to a reasonable target price at this point in time.  If it dips into the low 9s again I will buy more but for now I will sit tight.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on May 02, 2014, 03:24:54 PM
It's a rather dramatic change, and it started from the top.
Title: Re: PWE - Penn West Petroleum
Post by: tengen on July 30, 2014, 09:45:43 AM
Account irregularities at Pennwest. Stock sinking like a rock.

http://www.calgaryherald.com/business/Penn+West+warns+accounting+irregularities/10073522/story.html

I've never really trusted earnings statements from any big company. There's just too many ways to manipulate them. I guess Pennwest had some incompetent accountants to do it in an illegal way. They've been fired and I still have faith in the integrity of the current management team. Note that the irregularities were detected by the new CFO.

My immediate thought is that the market has over-reacted; so I added to my position.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on July 30, 2014, 08:20:58 PM
Complicated feeling. Lost lots of paper profit today but nice to see the new CFO cleaning house. This will lead to a much stronger company down the road and should help asset sales down the road with cleaned book.

Operationally this is going to the right direction and showing pretty good #s already.

Hope this will be over soon.
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on July 30, 2014, 08:21:46 PM
Anyone following the story at Penn West?  A large-cap oil and gas explorations company in Canada.  Stock dropped by 14% on an accounting issue brought up voluntarily by the management.  Think the drop was overdone and provides a good buying opportunity.  Company is in a turnaround phase with excellent new management, and the company is deeply undervalued both on an intrinsic value basis and relative value basis.  Thoughts? 
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on July 30, 2014, 08:49:01 PM
Anyone following the story at Penn West?  A large-cap oil and gas explorations company in Canada.  Stock dropped by 14% on an accounting issue brought up voluntarily by the management.  Think the drop was overdone and provides a good buying opportunity.  Company is in a turnaround phase with excellent new management, and the company is deeply undervalued both on an intrinsic value basis and relative value basis.  Thoughts?

What is your intrinsic value and how did you calculate it?  TIA
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on July 30, 2014, 09:02:07 PM
Account irregularities at Pennwest. Stock sinking like a rock.

http://www.calgaryherald.com/business/Penn+West+warns+accounting+irregularities/10073522/story.html

I've never really trusted earnings statements from any big company. There's just too many ways to manipulate them. I guess Pennwest had some incompetent accountants to do it in an illegal way. They've been fired and I still have faith in the integrity of the current management team. Note that the irregularities were detected by the new CFO.

My immediate thought is that the market has over-reacted; so I added to my position.

Judging from the press release, it seems like the company capitalized expenses that should have been expensed.  This is a classic method for inflating earnings (e.g. Worldcom).

I don't think that the accountants were incompetent.  Somebody told them to do this.
Title: Re: PWE - Penn West Petroleum
Post by: saltybit on July 30, 2014, 10:24:11 PM
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/bitter-rivals-face-off-over-future-of-penn-west-petroleum/article19868726/
Bitter rivals face off over future of Penn West Petroleum
Title: Re: PWE - Penn West Petroleum
Post by: peter1234 on July 31, 2014, 03:27:48 AM
Account irregularities at Pennwest. Stock sinking like a rock.

http://www.calgaryherald.com/business/Penn+West+warns+accounting+irregularities/10073522/story.html

I've never really trusted earnings statements from any big company. There's just too many ways to manipulate them. I guess Pennwest had some incompetent accountants to do it in an illegal way. They've been fired and I still have faith in the integrity of the current management team. Note that the irregularities were detected by the new CFO.

My immediate thought is that the market has over-reacted; so I added to my position.

Judging from the press release, it seems like the company capitalized expenses that should have been expensed.  This is a classic method for inflating earnings (e.g. Worldcom).

I don't think that the accountants were incompetent.  Somebody told them to do this.

Agreed, old Accounting staff probably was too aggressive and got accountants to sign off on it or even withheld information.


This statement might need further analysis:
Quote
It added it may also cease to be in compliance with debt covenants, adding it is talking with lenders about possibly waiving those covenants.
Title: Re: PWE - Penn West Petroleum
Post by: Andy Dufresne on July 31, 2014, 03:37:25 AM
Anyone following the story at Penn West?  A large-cap oil and gas explorations company in Canada.  Stock dropped by 14% on an accounting issue brought up voluntarily by the management.  Think the drop was overdone and provides a good buying opportunity.  Company is in a turnaround phase with excellent new management, and the company is deeply undervalued both on an intrinsic value basis and relative value basis.  Thoughts?

yzstevie,

Welcome to the Corner :) Please note that there already is a Penn West thread in existence so it would be better to concentrate all of the conversations there.

Best,

Andy
Title: Re: PWE - Penn West Petroleum
Post by: biaggio on July 31, 2014, 09:05:06 AM
Chinese trope for crisis=danger + opportunity or something like that.

A few weeks ago I was wishing for a larger position in PWE. Now I have the opportunity.

Concerns ("danger"):

-will there be more accounting issues uncovered
-how will restatements effect operations going forward
-how will restatements effect debt covenants
-are directors/audit committee members that originally signed off on statements the ones looking into this.

Facts ("opportunity"):

i still has good assets with

2p reserves valued at $9B vs EV of ~$6.5B (though I think the value of the oil in this evaluation is overstated if the projected operating costs in the estimate are over stated-anyone more knowledgeable on this correct me if I am wrong)

If they produce 104,000 barrel per day with $29 netback they will have cash flow of just over $1b not bad for EV of $6.5b (15% return)

ii I like new management

-they seem like straight shooter
-so far has done great job operationally
-I am glad they have not had a fire sale on their assets

iii I think PWE can be a good business. I think the world is still going to need oil in 5-10 years

iv restatements occurred under old management

My 5 year outcome probability calculation (number pulled out of my a$$ mostly so may not mean anything but I think might be helpful to think of possibility)

i  Bullish Projection-->
50% =Meets management goal for 2018 of $4.20/fund from op x 7.5 or $32  = $16                             
ii  Base rate-->
23%=No growth in net back EPS $2.24 EPS x 7.5       $17                                 $4
23%= current earnings with 3-4% growth x 7.           $20                                 $5
iv Bear Case--->
   2% economic disaster with oil dropping by 50%  IV cut in half = $4                  $1
   2%bankrupt= shares go to 0                                                                          0                   


Total 5 year estimated probable outcome: $26---> IRR 24% + 6% dividend
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on July 31, 2014, 02:50:44 PM
Thanks for sharing your #s. The recent weakness and the accounting news do provide good opportunity to load up. Some tidbits.


http://www.bnn.ca/News/2014/7/30/Canadian-energy-giant-Penn-West-reveals-accounting-irregularities-.aspx


“Although [second-quarter] production volumes were better than expected, we believe that the improving operations strategy will be overshadowed by the accounting audit and its potential ripple effects across the business,” Wood said in a research note. “Although Penn West appears to be forthcoming in its findings early on, the broader impact on financial operating measures is relatively unclear today.”

Penn West did not say which employees are “believed responsible” for the accounting irregularities, but noted they are no longer working for the company. The review arose from information brought to the attention of chief financial officer David Dyck, who started on May 1, taking over from Todd Takeyasu. In an interview late Tuesday, Mr. Takeyasu said the committee’s concerns could be a result of different interpretations of accounting methods.

“Some of this stuff is grey, but I’m probably not at liberty to say much,” he said. “Some of that is possibly a matter of documentation.”

Penn West’s former chairman, Bill Andrew, who is now chairman and CEO of Long Run Exploration Ltd., was not immediately available for comment.

Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on August 07, 2014, 05:32:55 AM
Quite a good article on the PWT nnsense:

http://www.calgaryherald.com/business/Yedlin+Penn+West+reaction+inflated/10092994/story.html?__federated=1

biaggio, I too,would like to increase my position.  I am trying to scare up some cash.  Dividend is nearly at the 7% level again. 
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on August 07, 2014, 06:00:41 AM
I bought more leaps.
Much more confident on PWE than last time it was at 7.

People say its very similar to martinrae which rebounded quite well.
I am an accountant, and honestly this pullback doesnt make much sense.
If you dont know the company then I can understand why you would sell, but this is new Management fixing things, not old Management hiding things....
Title: Re: PWE - Penn West Petroleum
Post by: Andy Dufresne on August 07, 2014, 06:12:46 AM
Myth,

Can you explain your confidence? Assuming you bought the Jan 2016 strike 7 at the closing price of USD 1.4, you are effectively paying 13.7% annualized for 17 months AND giving up 7% in the dividend, so it's paying almost 21% for 5.35 times leverage (7.5 divided by 1.4) ...

Just trying to get a handle on your thinking here

Thanks!
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on August 07, 2014, 06:43:26 AM
I bout the $5 Jan 2016, prefer the leverage to the yield.
It was about 15 cents away from being in the money.
Title: Re: PWE - Penn West Petroleum
Post by: Andy Dufresne on August 07, 2014, 06:59:46 AM
Ahhh, you bought ITM :) thanks, I understand!
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on August 12, 2014, 03:54:23 PM
At this price I am interested in buying but I decided to do it in a different way and would love some input and opinion about this method of buying into PWE

I am comfortable buying at this price but I was checking out the options and ended up writing some puts instead.

as an explanation I am doing this in an IRA account so there isn't any margin so they reserve the cash. Right now I have over 50% in cash because I haven't found enough that I'm interested in. so I have a bunch of cash sitting there doing nothing.

I wrote some Jan 2015 $7.00 puts and received $0.70 premium.

my thinking went like this

Result A: stock drops below $7 and I now own the stock at a effective purchase price of $6.30 - downside: similar to my buying the stock outright except I am getting in at a lower point then it is currently ($7.37)
Result B: stock rises or stays stable and I make 23% return rate on my reserved cash for 5 months - downside: if it goes up significantly then I will have missed out on the significant appreciation but then again I should be content with 23%

First time I have done this so I would really be interested in your thoughts about my thinking and if I am missing something.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on August 13, 2014, 12:54:33 PM
I actually increased the my position size by about 15%, then backed off, and sold it for 1 cent higher.  If this restatement results in the dividend getting cut, the stock will be crushed.  I expect that is why it is trading down so dramatically. 

Whether that comes to pass or not, I would rather be less exposed right now.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on August 13, 2014, 03:28:34 PM
You are completely out of it or you sold your new shares only?
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on August 13, 2014, 06:56:52 PM
Based on what we know, it's unlikely that the dividend will be touched. They just provided an update, they found no material new info YET which is a relief (I take it they should have looked at 2014 #s by now?).

Their payout ratio is low, ~25% and they have some buffers due to stronger pricing deck and production.

Stock dropped nears 20%+ since the news broke, I am holding on now.

Title: Re: PWE - Penn West Petroleum
Post by: Pick52 on August 14, 2014, 05:52:39 AM
According to BNN revised numbers will be out Oct 14 at the latest
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on August 14, 2014, 06:44:49 AM
You are completely out of it or you sold your new shares only?

New shares only. 

Alert, the thing that worries me is that their creditors may force a dividend cut.  The delayed report has breached some covenants.  If major bond holders are worried, there goes the dividend.  Eventually it would be reinstated but not without creaming the stock price in the meantime. 

I am just being prudent.  I have been blindsided by dividend cuts enough times. 
Title: Re: PWE - Penn West Petroleum
Post by: tengen on August 27, 2014, 01:16:10 PM
Pennwest provides update on accounting review: http://pennwest.mediaroom.com/index.php?s=27585&item=135224

They haven't found any previously undisclosed issues. Review is still ongoing.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 18, 2014, 06:03:05 AM
Q2 Results:

http://pennwest.mediaroom.com/index.php?s=27585&item=135228

Mostly unchanged.  Restatement historical in nature.  Big pop today?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 19, 2014, 02:54:45 PM
More than doubled my position yesterday and today, now that the accounting shenanigans are out of the way. 

Funds flow is 60 cents per quarter, eps 28; dividend is 14 cents. 

Trading at 25 % of some of its peers on a P/bv.  This should be good for a dividend of $2.00 per year. 
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on September 20, 2014, 07:08:42 AM
Thinking of doing the same.
Already very overweight.

I think they will see something big, and put the debt issues to rest once and for all.......
I am also learning better to buy after the news is out. Right now only barely above lows with good news and good earnings, same with MEI. Best to wait for the fog to clear to add.
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on September 22, 2014, 08:41:55 PM
You guys got me interested.  First - I'm not a good commodity investor.

Seems to me PennWest is a disaster of an oil and gas company (at least it was).  It has a history of 10x share count expansion without concurrent value per share added.  They got caught up in the trust debacle, payed too much dividend, had to borrow money to pay the dividend, issue shares, debt expanded compared to peers, dividend cut.....Stock has gone from 40's to 7.

New Board May 2013 (New chair -Richard George - CEO Suncor 20 yrs). New CEO 2mo later. New CFO about a year later which led to an accounting restatement which didn't affect reserves, cash, debt, or production but did change past earnings (essentially an issue of capitalizing some expenses).  Fairly immaterial to today if you believe the attached selected slides of management presentation on cost reduction, right sizing the assets base, and then subsequent forward plans.

A bet on this is: 
1. Oil price doesn't drop more than 10ish%
2. Cost reductions are sustainable and can be brought in line with peers
3. Management is indeed credible (so far they are doing what they have communicated)
4. Eventually the market values it similar to peers - 2-3 yr timeframe - or better

Their price to risk weighted NAV is 48% vs peer average in the 70's (lowest I saw in a CIBC research report).

Agreed that the next big thing is another asset sale.  Though it wouldn't be surprising to see the stock price/company turn slowly.  This isn't the first time PWE's management has promised.....though it was a different management last time.

Downside:  Zero is a very low probability.  10-20% decline would be pretty easy to see with a drop in oil price.  50% decline would take an oil price shock and perhaps a dividend cut.

Seems a bit asymmetric.
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on September 23, 2014, 09:30:18 AM
New Board May 2013 (New chair -Richard George - CEO Suncor 20 yrs). New CEO 2mo later. New CFO about a year later which led to an accounting restatement which didn't affect reserves, cash, debt, or production but did change past earnings (essentially an issue of capitalizing some expenses).  Fairly immaterial to today if you believe the attached selected slides of management presentation on cost reduction, right sizing the assets base, and then subsequent forward plans.

The restatement matters because the company's economics and margins aren't as good as what they said in the past.

Suppose that a company says that its operating margin is 20% but in reality it is more like 10%.  Going forward, it would make sense it model out the company based on 10% operating margins.

In the case of oil and gas companies, you should value their assets based on discounted cash flow.  If it turns out that expenses are being inappropriately capitalized, then you would need to adjust your DCF model and reduce the net present value of the assets.
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on September 23, 2014, 07:09:59 PM
Until management proves itself for long enough to be trusted, this stock will probably trade on its dividend and the price of oil.  That of course assumes debt and shares won't have to be issued to keep an appropriate replacement well drill rate - and pay the dividend.
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on October 06, 2014, 11:26:39 AM
I sold some more put options today.
Jan 16 $7

I either make 34% on my money for the next year+ or I get into PWE at a cost basis of $4.80.

I know we should always invert and try to understand the thinking of the other person in a transaction but I am really having a hard time mentally wrapping my head around the thinking of the person buying my put. Just how low do they expect this to go that they would be willing to risk 2.20 per share to make what could at very best be a $4.80 profit, and that's if the company goes bankrupt.

Maybe I'm not thinking of it correctly, I admit I have never bought a put option so maybe i just don't understand the thinking going into buying one. Any input?
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 06, 2014, 11:41:43 AM
PWE doesn't seem like a low-cost producer.
Did you by chance calculate its value assuming long term oil price settles down around $80?

I sold some more put options today.
Jan 16 $7

I either make 34% on my money for the next year+ or I get into PWE at a cost basis of $4.80.

I know we should always invert and try to understand the thinking of the other person in a transaction but I am really having a hard time mentally wrapping my head around the thinking of the person buying my put. Just how low do they expect this to go that they would be willing to risk 2.20 per share to make what could at very best be a $4.80 profit, and that's if the company goes bankrupt.

Maybe I'm not thinking of it correctly, I admit I have never bought a put option so maybe i just don't understand the thinking going into buying one. Any input?
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on October 06, 2014, 12:02:38 PM
Hard to find low cost producers selling at half of book

U buy Pennwest hoping it will turn to be one.

Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 06, 2014, 12:12:59 PM
Did PWE effectively deleverage?
Seems no

Hard to find low cost producers selling at half of book

U buy Pennwest hoping it will turn to be one.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on October 06, 2014, 12:28:56 PM
Yes and no

Yes, they did sold some assets for 700m and their cash flow is improving because of cost efficient and better commodities pricing


But it is far from done. Still need about 1 to 2 billions asset sale.

Canadian pricing for some reason is still pretty robust so hope some one will pay a fair price but gone were the days that companies will sell shares to fund asset acquisition as share price has down big.

So not many can afford.

Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 06, 2014, 01:49:18 PM
http://finance.yahoo.com/news/chevron-selling-duvernay-stake-1-5b-deal-104951155--finance.html

These guys sell today 30% of their Duvernay acreage for $1.5 billion. They have drilled a grand total of 16 wells on it... Do the math with PWT on 100% of their Duvernay asset and assume similar metrics and see how the debt and Enterprise Value looks like afterwards on a non-producing asset. 

Then there is the Encana - Athlon deal at very high metrics.

People are simply panicking here because PWT is still levered, oil has weakened to $90!!! and the company has not re-hedged, but clearly operating metrics have turned and there are still many assets within the company producing next to no cash that could make this a double overnight. We should be thankful for this low share price and the fact that our managers have been disciplined not to entertain fire sales.

Clearly the Kuwaitees and people at Encana did not care about the current dire forecasts that we are being fed about the oil price. Clearly deals are being made in the industry. Our time will come.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on October 06, 2014, 05:10:06 PM
I have been buying options on a D sale for a while.
One day. We will have an announcement.
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on October 06, 2014, 05:43:11 PM
I have been buying options on a D sale for a while.
One day. We will have an announcement.

"D sale"?

What options are you doing?
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on October 06, 2014, 06:03:26 PM
Duvernay acreage sale.
It was listed early in the year. They expect Well Results by Nov or YE.

They have something sold for Nov, and eluded to it, but something tells me its not the Duvernay.
They have 2 joint ventures (Peace River and Gas Project), the Duvernay Acreage, and potentially one core play for sale.

Outside of the core play, they dont get much credit for the asset.
I want one sold for $1 billion with debt retired.

From what I see they are moving towards best in play, and field metrics are improving.
They need to complete the Financial work and begin growing again. They said they will have an update in Nov, so it will be interesting to see what is sold.

My options are all 2016.
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on October 06, 2014, 06:29:56 PM
anyone know when the 2017 options come out?
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on October 06, 2014, 06:42:20 PM
I believe that PWE is on the MJSD - March, June, September and December option cycle.  This is the "March Cycle".

On Monday, November 17, 2014: 2017 LEAPS begin trading for the March cycle.

Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on October 06, 2014, 06:46:19 PM
Thanks Kfh227
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 07, 2014, 10:30:09 PM
YES, just sell those marginal acre


Hard to find low cost producers selling at half of book

U buy Pennwest hoping it will turn to be one.
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on October 08, 2014, 12:23:27 AM
Just thinking in terms of more macro risks, what are the chances of oil going down further and staying down for quite some time, i.e. what if U.S. supply continues to be strong, or no action from OPEC on cutting down production, or global demand continues to be weak?  What are the chances of a fundamental change in the price/demand of oil in the near future, i.e. alternative energy like solar?  Think it is fairly clear that PWE is a bargain for company-specific issues, but just wondering about the overall industry/macro risks. 
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on October 08, 2014, 02:11:01 AM
If oil stays in the 70s or 80s then its not as cheap as it appears.
You have to look at marginal production though, and the fact that demand is not as elastic.
Supply also declines significantly for shale plays.

In addition most middle east countries and Russia have budgets based on $90 - $100 oil.
Title: Re: PWE - Penn West Petroleum
Post by: Andy Dufresne on October 08, 2014, 03:29:46 AM
Russia is very much dependent on high oil prices, and its production costs are only going to go up as the old Soviet fields developed in Western Siberia dry out and they have to start drilling in Eastern Siberia.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 08, 2014, 06:15:38 AM
It is funny that people are now talking about a glut of oil. What was the situation just 3 1/2 months ago? And if there is so much oil in the U.S. then why is WTI pricing not collapsing further? After all, it is Brent that has dropped the most, meaning that it is international oil having a hard time finding a home above $90/barrel. $90/barrel seems like a price that buyers and sellers are quite willing to accept in the U.S.

Also, while it is true that the U.S. has been producing more oil, these new barrels are all coming from newly developed high decline rate wells. This means that a lot of new wells have to be drilled to simply maintain current production. These are not all cheap wells as highlighted by a recent forecast from Continental Resources with significant cost increase. And what happens to capex budgets when oil executives all get worried by the same information that we are being fed daily at the moment? Don't you think that they will face pressure from the investment community to go more into some form of scarcity budget?

Lower priced oil means more consumption. It means less "tax" on the economy. It means that more demand for oil will materialize since substitutes become unattractive.

Cardboard

Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on October 08, 2014, 06:32:30 AM
Cardboard - agreed. With higher marginal cost of production from shale oil, compared to conventional wells, there's a floor under oil. While lower oil is not good for any of the producers, good returns at $90 oil are there for the better run co's. PWT, is righting the ship. With lower oil, we are now in a double wait and see mode for PWT. The market will want to see higher prices AND management delivering on the biz improvement initiatives - reduced capex, assts sales, and lower well costs. Apparently Wilbur Ross is sniffing around the Canadian oil patch. That's probably the best news yet! It means we are closer to the bottom then the top. He must feel just fine about the future of oil.

LL

May add to PWT this week. Doesn't the Kuwait purchase in Duv, at $15k/ acre add legitimacy to PWT's value?
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on October 08, 2014, 08:50:25 AM
Wow.  The drop continues.  One thing I am curious about is why haven't the insiders stepped in to purchase shares?  Chairman has bought at much higher levels before.  Wonder why they haven't stepped in yet?
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on October 08, 2014, 09:08:17 AM
Wow.  The drop continues.  One thing I am curious about is why haven't the insiders stepped in to purchase shares?  Chairman has bought at much higher levels before.  Wonder why they haven't stepped in yet?

I believe they are prohibited from buying right now because of the investigation into accounting issues. I believe that will continue to sometime this month
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on October 08, 2014, 09:36:30 AM
Management can't buy now - here's a clip from Sept 18th PR, relating to the accounting restatement:

"As previously disclosed, the ASC and the Ontario Securities Commission have issued management cease trade orders (the "MCTOs") that prohibit the directors and executive officers of the Company from trading in or purchasing securities of the Company, subject to certain limited circumstances. The MCTOs do not affect the ability of other persons to trade in the common shares or other securities of the Company. The Company understands that the MCTOs are likely to expire or be revoked shortly after the completion of the restatement and the issuance of the Q2 2014 Interim Filings."
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on October 08, 2014, 10:06:16 AM
So i get that the price of oil can go down further and stay there for months even a year or two but I have a hard time understanding oil being below 90 long term, at least as i look at the world. I also understand my inability to predict the price of oil especially in the short term.

So what I am trying to understand is how low a price point and for how long can PWE survive for?

Assuming no asset sales... what is the really bleak scenario and how long can they survive? Assume oil stays at say 80, how long before bankruptcy?
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on October 08, 2014, 10:18:26 AM
Management can't buy now - here's a clip from Sept 18th PR, relating to the accounting restatement:

"As previously disclosed, the ASC and the Ontario Securities Commission have issued management cease trade orders (the "MCTOs") that prohibit the directors and executive officers of the Company from trading in or purchasing securities of the Company, subject to certain limited circumstances. The MCTOs do not affect the ability of other persons to trade in the common shares or other securities of the Company. The Company understands that the MCTOs are likely to expire or be revoked shortly after the completion of the restatement and the issuance of the Q2 2014 Interim Filings."

Didn't the company have already completed their accounting review and filed 2Q14 filings last month? The cease trade order is still in effect? 
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on October 08, 2014, 10:35:13 AM
So i get that the price of oil can go down further and stay there for months even a year or two but I have a hard time understanding oil being below 90 long term, at least as i look at the world. I also understand my inability to predict the price of oil especially in the short term.

So what I am trying to understand is how low a price point and for how long can PWE survive for?

Assuming no asset sales... what is the really bleak scenario and how long can they survive? Assume oil stays at say 80, how long before bankruptcy?

Their pricing assumptions are all posted.

If we have 80 oil, we still are looking at  700 plus millions cash flow if u assume cost and loonie do not come down.

Thats from my recollection.

I think the market is pricing in much lower wti pricing.

Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 08, 2014, 11:28:08 AM
the problem is that the cash flow can barely cover the cost unless they aggressively sell their holdings
this is my understanding

So i get that the price of oil can go down further and stay there for months even a year or two but I have a hard time understanding oil being below 90 long term, at least as i look at the world. I also understand my inability to predict the price of oil especially in the short term.

So what I am trying to understand is how low a price point and for how long can PWE survive for?

Assuming no asset sales... what is the really bleak scenario and how long can they survive? Assume oil stays at say 80, how long before bankruptcy?

Their pricing assumptions are all posted.

If we have 80 oil, we still are looking at  700 plus millions cash flow if u assume cost and loonie do not come down.

Thats from my recollection.

I think the market is pricing in much lower wti pricing.
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on October 08, 2014, 12:04:12 PM

Cease trade order was cancelled on September 23, 2014 by the Alberta Securities Commission. So it would be nice to see some inside buying!
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 08, 2014, 03:14:39 PM
Can't trade if you are aware of non-public information. Very likely the case now with the closing of Q3 and compilation of financial statements. Somebody knows the black out timing for insiders? Possibly also some asset sale in the making.

There has been some aggressive shorting and likely naked into these beaten up oil and gas stocks that we follow. There was an article in recent days I believe at Motley Fool discussing how you can easily introduce fear by selling aggressively in the morning. Do this day after day and you get a 2008 style panic as we are experiencing into these names.

Down 50% in less than 4 months for many of these names is unreal. Even the internet bubble pop which was the largest bubble in history did not deflate that fast. These guys are producing oil which is not going out of style any time soon.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: doc75 on October 08, 2014, 04:47:45 PM
Can't trade if you are aware of non-public information. Very likely the case now with the closing of Q3 and compilation of financial statements. Somebody knows the black out timing for insiders? Possibly also some asset sale in the making.

Down 50% in less than 4 months for many of these names is unreal. Even the internet bubble pop which was the largest bubble in history did not deflate that fast. These guys are producing oil which is not going out of style any time soon.

I know a lot of companies black out from end of quarter until the release. Not sure for PWT.

I generally agree with you about the severity of the decline etc., but to play devil's advocate:    I think a lot of people are looking at these O&G co's as an elaborate Ponzi scheme.  This isn't something new. Just look at the beginning of this thread to see this type of scepticism. A large part of it is warranted.   I think the decline in oil  has caused a repricing of the sector in a similar way that tech was repriced in 2001-2001.  It's not a perfect comparison because of course in the tech boom you had piles of companies at lofty valuations that never had any cash flowing through the door. Different story here, but the oil price decline seems to have been a trigger to make people rethink the entire business model.  God knows many (most?) of these companies have somehow managed to destroy investor capital even with oil over $100, all the while making lots of managers very wealthy.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 08, 2014, 05:44:05 PM

Cease trade order was cancelled on September 23, 2014 by the Alberta Securities Commission. So it would be nice to see some inside buying!

What do you expect?  Rick George is down at least 2 million from his purchase prices.  Maybe he doesn't want all his money in Penn West?  He never sold when he was up 3-4 million.  I guarantee he knows this company inside out. 
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on October 08, 2014, 06:48:14 PM

Cease trade order was cancelled on September 23, 2014 by the Alberta Securities Commission. So it would be nice to see some inside buying!

Might have something to do with quarter end quiet period and/or asset sales pending. Remember they are dual listed @ both TSX and NYSE.

They bought significant amount @ 9 and 11 USD, PWE is looking better now than then. Not selling a single share since then tell you what they think.
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on October 08, 2014, 10:58:09 PM
Anyone looking at buying call options on the name?  I'm looking at the Jan 16 ones and they seem very illiquid?  What are some good call options to buy? 
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 09, 2014, 06:32:45 AM
If you knock out $1.5 billion from their net debt of $2.3 billion to account for non core assets (Duvernay, Cordova, etc.), this thing is trading more cheaply than even Lightstream on an Enterprise Value to cash flow basis. Below 4 times.

Of course, cash flow has moved down with no hedges (who knows if they got some new ones after Q2 end) and a decline in WTI, but it is the same for LTS, LEG and others.

Just shows how amazingly cheap this company has become.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: tombgrt on October 09, 2014, 07:01:07 AM
Anyone looking at buying call options on the name?  I'm looking at the Jan 16 ones and they seem very illiquid?  What are some good call options to buy? 

I was also wondering about that, in case the stock or sector plummeted even further. I think there was a 30% spread on the $5's yesterday.
Title: Re: PWE - Penn West Petroleum
Post by: doc75 on October 09, 2014, 07:08:35 AM
A relevant article on Bloomberg:

http://www.bloomberg.com/news/2014-10-07/shale-boom-tested-as-sub-90-oil-threatens-u-s-drillers.html

Excerpt:

"Crude prices might not fall enough to shut in production. About 70 percent of U.S. reserves would remain economic with global prices at $75 a barrel, according to Wood Mackenzie, an industry consultant based in Edinburgh.

OPEC also may prevent further declines because members need high prices to support social spending. Saudi Arabia needs $87.63 a barrel to balance its budget, compared with $66.50 for the United Arab Emirates and $92.96 for Iraq, the International Monetary Fund estimates."

Title: Re: PWE - Penn West Petroleum
Post by: KCLarkin on October 09, 2014, 07:29:34 AM
Down 50% in less than 4 months for many of these names is unreal. Even the internet bubble pop which was the largest bubble in history did not deflate that fast. These guys are producing oil which is not going out of style any time soon.

This doesn't seem particularly unreal. Stocks are volatile. Even for stable big-caps, 50% moves are very common.
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on October 10, 2014, 12:17:48 AM
Found this at another board for a recent call with Roberts.  Take it for what it's worth...

******************
Discussion with Roberts:

-He is very confident in the outcome of the turnaround, they are making good progress.
  Still expect to grow production at these price levels.

-They have planned for a lower price environment

-Market for properties is still very good, but will not sell any asset at just any price...want fair value

-Will be more thoroughly addressing debt in next earnings and how they plan to take it down.
   I stressed the company needs to give more detailed information on their plan to address this.

-I asked him to stop dividend and buy back stock(at this discount to book, not forever)
  He asked me if I would be OK with that, I said yes. I suggested he should survey his    institutional buyers on that point.

-Said they are taking even more costs out and expect that to continue.

I did give him an ear full on the re-statement and how it was handled/timing, he said it was unavoidable because it happened as a result of a new CFO coming to the company.

Title: Re: PWE - Penn West Petroleum
Post by: doc75 on October 10, 2014, 07:25:34 AM
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/

Title: Re: PWE - Penn West Petroleum
Post by: zippy1 on October 23, 2014, 05:23:05 AM
http://finance.yahoo.com/news/penn-west-announces-355-million-103500113.html
Quote
Penn West Announces $355 Million Non-Core Asset Disposition
Quote
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."
Quote
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.
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on October 23, 2014, 09:47:18 AM
Hi Uccmal

What's your take on the Sale of Assests

Thanks
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 27, 2014, 09:31:57 AM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on October 27, 2014, 09:45:14 AM
Thanks Al for youR insight. I am not surprised with PWE due Oil price going down (below $80). Thanks
Title: Re: PWE - Penn West Petroleum
Post by: xtreeq on November 05, 2014, 04:32:32 AM
2014 Q3 results are out
http://pennwest.mediaroom.com/index.php?s=27585&item=135234
Title: Re: PWE - Penn West Petroleum
Post by: MrB on November 05, 2014, 07:20:44 AM
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?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 05, 2014, 02:16:35 PM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on November 05, 2014, 02:41:08 PM
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
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on November 05, 2014, 04:21:45 PM
small add today @ $4.84.

LL
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on November 05, 2014, 05:23:22 PM
small add today @ $4.84.

LL

What is your take on oil price?
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on November 15, 2014, 06:43:48 PM
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?
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on November 17, 2014, 08:27:32 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: tengen on November 17, 2014, 10:02:18 AM
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:
Quote
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.
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on November 17, 2014, 10:11:54 AM
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?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 19, 2014, 04:39:18 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: elevensecsrt4 on November 19, 2014, 05:23:29 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 19, 2014, 07:57:13 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on November 19, 2014, 08:13:47 AM
Uccmal: agreed.

Check https://canadianinsider.com/ for recent transactions.
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on November 19, 2014, 12:46:02 PM
Prem doubled.  Dang it.  I need to fund my Roth IRA and add to my PWE holding in a tax advantaged account.
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on November 19, 2014, 12:55:35 PM
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
Title: Re: PWE - Penn West Petroleum
Post by: elevensecsrt4 on November 19, 2014, 01:34:19 PM
Uccmal: agreed.

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

Thanks guys I will try em.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 19, 2014, 01:52:08 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: tengen on November 20, 2014, 10:54:29 AM
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. :-)
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 22, 2014, 08:32:01 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on November 23, 2014, 12:31:21 PM
Thought you guys might like this commentary from the IV boards by Nawar...

http://www.investorvillage.com/smbd.asp?mb=4143&mn=319202&pt=msg&mid=14395770

Why I bought PennWest

I have been asked to elaborate on my rational for taking a large position in PWT, however before I do that, I need to preface that I believe in peak oil theory, I believe the world has run out of cheap oil and that the global marginal cost of a barrel of oil exceeds $80 today (deep water, arctic and several shale plays). I also track the middle east closely (having been born there) and it is clear to me that the Sunni/Shia Muslim conflict will go on for a long time to come and oil supplies in the region will be effected on regular basis, and finally I believe many OPEC countries have political oil reserves that don’t exist in reality (I elaborate on some of those themes in my book “The bull of Heaven” for those who are interested).
 
As for why I believe PWT is a good investment, I am a value investor and thus highly attracted to undervalued stocks in any sector and especially so in the oil a sector, a sector I am very familiar with. With Pennwest being the largest Cardium lease holder, the company has been on my watch list since it traded at $20+ a share many years back, however I never pulled the trigger since I viewed the company management as inefficient and the company was too large for me to undertake an activist campaign.

Pennwest currently trade at 4.1 EV/DACF for 2014 vs. 9.7 EV/DACF for the sector (I am using 2014 in order to have a constant price comparison), meanwhile the company trades at 62% to NAV on 1P reserves vs 244% premium to NAV for the sector and even cheaper on 2P reserves basis. Meanwhile the company is trading at $44K per flowing barrel vs. $112K for peers and likewise for EV/barrel in reserves at $19.37 vs $38.5 for peers (Metrics derived from Scotiabank tables for their Intermediate E&P universe and dated November 17th 2014).

The above clearly indicates that PWT is undervalued on many metrics, but let’s face it, companies that are undervalued are a dime a dozen, buying a cheap company doesn’t not necessary lead to above average returns; what is needed is an understanding of the cause for that undervaluation, and whether steps are being taken to correct it. In the case of PWT, the causes for the undervaluation in my opinion were/are:

  Historically Incompetent management (addressed)

- Inefficient operator (addressed and being addressed)

- Fragmented asset base (being addressed)

- Too much debt (being addressed)

- Over distribution (addressed to some extent but still high)

- Lack of a clear long term plan (addressed)


We can see from the above that all those points have either been addressed or are being addressed, I strongly advice viewing PWT November presentation (http://www.pennwest.com/investors/presentations-webcasts) for those looking for an update on the progress on those issues.

Prior to the accounting restatement, and the decline in oil prices, the market was starting to recognize that the issues that plagued the company in the past were being addressed and the stock was on an upswing, the accounting hiccup stalled this rebound process and the collapse in oil killed it, yet the underlying improvements are on track. The management team in charge is extremely competent. I encourage reading some of the common sense statements that have been made by the CEO:

“This is a business about making money, not barrels and that’s a significant culture shift for this company and I think it’s going to continue to bear dividends as we go forward and that’s the reason why I don’t get too hung up on the short-term production issues.”


http://www.news1130.com/2014/01/23/penn-west-ceo-sees-big-culture-shift-away-from-output-toward-profitability/

“I tell people my Texaco pedigree sets me up to understand this stuff at a very basic level. We were known as the hardest of the hardcore operators – the idea of stretching everything to create margin is something that was just pounded into me from a very young age as an engineer.”....... “I think it is fair to say – and I’m not disparaging anybody who has run this place in the past – that we’re in the penalty box. I get that. Here is a company that has not kept its promises as well as it could have done. But what I say to folks is we’re going to make our own results here: we’re going to work hard, we’re going to work these assets hard, and people will start to understand that we are serious people who can be trusted to deliver results.”

http://albertaventure.com/2014/09/v250_penn-west-david-roberts/

Some of the above is music to my ears, I have been to Calgary several times and I have met with CEOs and board members and while many of them talk the talk of efficiency, few actually deliver. This CEO reminds me of the language used by the guys at Peyto, and it is not just talk, PWT is drilling a Cardium well today in 8 days vs 22 days in the past and a Viking well in 2 days vs 8 days in the past, this is a massive improvement and this is starting to show in the numbers.

The market right now is hung up on their balance sheet, yet the company does not have near term material term notes maturities and thus it has time to sell many of its none-core remaining assets, perhaps some of those will not be sold for great prices, but the market is far from pricing those at a premium to start with, I believe the $500m asset sales target by 2016 is very reasonable. The Peace River assets in partnership with China Investment Corp are quite attractive and Baytex has been very successful operating in that area along with Shell and Murphy Oil. I also believe their Duvernay assets are attractive with increasingly positive results from Talisman in the area and they also have the shale gas assets in BC which are looking more attractive now that BC is offering very attractive LNG terms and finally the Swan Hill oil assets are very attractive to several operators. The debt issue is not an issue anymore, not for this company anyhow.

Oil prices are currently lower than their planned 2015 budget which is set at $86.5 Edmonton Par at $1.04 exchange rate. However, the weaker Canadian dollar has offset to a large extent the weakness in WTI, meanwhile the upcoming reversal of Line 9B by Enbridge will further shrink the light oil differential with WTI for Canadian oil with 300K barrels per day going east (this is a very large amount when we consider Canadian light oil production is roughly 1.5m barrels in size and largely stagnant in size). However if oil prices remain weak the capex program could be slowed and their turnaround plan could be slowed, but this is a macro risk I am comfortable with.

The long term business plan outlined (and reiterated just last Monday) by the management is on track, the plan is realistic, achievable and very attractive projected 20% cash flow CAGR between now and 2019 (again I strongly recommend viewing the company November slides). Every day, the company is making progress; this is a copy paste from an email I got from Mr. Roberts yesterday:

“We continue to focus on doing the right things, the right way, each day – always with a view in enhancing the value of the company for our stakeholders.”

At this stage, the best thing a PWT investor can do is sit tight, and not track the stock minute to minute on the screen. I would advice checking the position once a quarter around the quarterly conference calls, and as long as the management is delivering the stock price will get there. For those who are patient, this stock could offer 300% to 400% return (ex-dividends) between now and 2017. As Jesse Livermore once said:

It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.


Good luck,

Regards,

Nawar
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on November 23, 2014, 12:44:06 PM
And some Good commentary on the longer term effect of the current price drop...

http://www.investorvillage.com/smbd.asp?mb=4288&mn=151650&pt=msg&mid=14337781

Broken oil market - long term pirce spike

I have been following the oil market as long as I can remember. What’s going on right now in the oil market is highly suspect; prices are clearly being manipulated for political and economic gain. This attack on the oil market will have severe consequences on future oil supply, already at $100 oil, several major oil projects have been cancelled over the last few years, at $75-$80 all new major projects will come to a standstill at some point.

Yet, this is happening during a period in which the need for alternative long supplies is crucial, since the panacea of future oil supply: Iraq is going through a bloody civil war thus rendering any major investment in oil production infrastructure in the country highly uncertain. Meanwhile, the rivalry between Al Saud and Iran has never been more intense with Saudi Arabia surrounded by aggressive Shia forces in the South (Yemen), East (Iran) and North (Iraq). The Saudi-Iran proxy war currently taking place in Syria and to some extent Iraq is far from over. As if the situation is not bad enough Libya is sliding in a deeper civil war, a war that has already pulled Egypt and the UAE in the fight.

More worrisome, US shale production is projected to peak in the 2015-2017 time frame (probably faster at current prices) once this major source of production growth stalls a growing disconnect between supply and demand will emerge. Finally, the current sanctions on Russia have stalled and delayed multiple long term oil supply projects, the effect of those cancellations will be felt just as shale oil peaks.

The current opportunity to buy quality Canadian oil stocks (which have long been accustomed to low prices, and are currently being shielded to some extent by a low $CDN and narrow differentials) will prove to be a buying opportunity of a life time, anything bought today should be held until 2020 and beyond, because the next oil spike will take us beyond the 2008 highs in my opinion.

Regards,
Nawar
Title: Re: PWE - Penn West Petroleum
Post by: Libs on November 24, 2014, 01:17:02 PM
This is a very interesting idea....but may I play devil's advocate?

Can someone explain the dividend's sustainability to me - I'm not terribly good at the accounting...what am I missing?

Last quarter they had $180MM in 'depreciation and exploration" charges which wiped out any net income. This seems like the right number, as the plan next year is for ~$800MM in cap ex, and they do close to that every year. They NEED to do that every year, as has been discussed here.

So where is the cash for the dividend going to come from? From better execution / cost cutting etc.?

This is from Morningstar recently ( it's kind of harsh, although it should be noted they value the stock at $6), this is how they frame the concern:
-------------

...the firm’s dividend, which
is greater than net income and reduces the book value
equity. Over the past five years, dividend payments have
exceeded net income by nearly CAD 2.2 billion. The firm
issued CAD 1 billion of new equity over the same period,
which helped it maintain a more conservative leverage
ratio. We forecast that dividends (at their current level)
will exceed net income by CAD 380 million from 2014 to
2018. We think this puts management between a rock and
a hard place: Slash the dividend again or continue to issue
new equity to fund it and maintain a reasonable degree of leverage on the balance sheet.
---
They also write:
------
Penn West’s dividend implies a yield
on its stock of over 11%. The annual liability associated
with this obligation amounts to roughly CAD 225 million
in 2014 and rises to CAD 276 million in 2015, a truly
remarkable commitment when viewed against our
estimate of cumulative cash flow generated for the
2015-2018 period of negative CAD 21 million (excluding
potential non-core divestitures, which appear likely if not
essential to sustain operations).
Interestingly, when pressed on its earnings call regarding
the sustainability of its quarterly dividend under a scenario
of sustained lower crude pricing, not only did the company
declare the dividend perfectly safe and essentially off the
table for consideration, but also went a step further in
implying it would sooner rein in investment in its assets
than so much as consider a cut to its dividend.
-------------------------

Thanks for any insights.
Title: Re: PWE - Penn West Petroleum
Post by: Fat Pitch on November 24, 2014, 01:45:36 PM
Many E&Ps must spend every cent they earn from OCF to maintain their current production profiles. This demonstrates how marginable their assets are. I think PWE is no different. The dividend is being paid out of asset sales/debt. This is why companies like SU held up during the oil sell off.

This is why quality aka low cost is king in commodity investing.
Title: Re: PWE - Penn West Petroleum
Post by: Libs on November 25, 2014, 08:47:36 AM
Many E&Ps must spend every cent they earn from OCF to maintain their current production profiles. This demonstrates how marginable their assets are. I think PWE is no different. The dividend is being paid out of asset sales/debt. This is why companies like SU held up during the oil sell off.

This is why quality aka low cost is king in commodity investing.

Ok, thanks...so how do they get out of this dividend 'trap'?

You can only devour your assets, or take on additional debt, for so long. What's the end game, other than praying for oil prices to rise?

Just trying to understand how to think about this. Otherwise I see a lot to like here..








Title: Re: PWE - Penn West Petroleum
Post by: Fat Pitch on November 25, 2014, 09:23:24 AM
They can always cut the dividend, but that’s irrelevant at this point. You have a business that must spend every cent it produces to just run in the same spot… there’s nothing left over for shareholders. Of course higher oil prices will cure this dilemma. 

This is a scratch n sniff sticker on higher oil prices.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on November 25, 2014, 11:15:34 AM
How much time do you guys spend on pennwest before making the above comments?
Title: Re: PWE - Penn West Petroleum
Post by: Libs on November 26, 2014, 07:06:59 AM
How much time do you guys spend on pennwest before making the above comments?

My problem isn't time spent, it's lack of knowledge :)

How do you view the dividend issue? What are we missing?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 26, 2014, 08:03:41 AM
Fat Pitch indicates that Pennwest is a bet on the oil price going back up at some point.  That is part of the picture.  He also indicates that Suncor has done okay in this environment, so far. 

Suncor was built into this stable powerhouse by Rick George who just happens to be the COB of Pennwest.  My bet involved in Pennwest involves managements ability to bring Pwt closer to the Suncor model of management. 

So what happens if oil continues to drop in price?  In Alberta, workers get laid off as property gets shut in.  Wage costs drop with the surplus of workers.  Expenses drop with less capex, less exploratory drilling etc.  Equipment cost and rental costs drop.  The existing production costs drop, lagging the oil price drop by a few months.  For Pennwest and other majors it is a temporary squeeze.  For many smaller E&P companies a drop in oil price is the death knell.  No bank or group of investors is going to force PWT to suddenly repay its debt at less than market value. 

The other side of the equation is gas price which is high and stable, so far. 

My bet is that PWT keeps slowly delevering into a more stable situation.  When oil inevitably swings upwards in value PWT will rise dramatically.  I am figuring the stock is easily a 300% gain. 

At some point the cost management will get reflected in the cash flow, and in the EPS.  Especially if the price of oil rises.  George and Roberts are not inexperienced with oil busts.  And both are buying stock continuously in PWT. 

Is the dividend safe.  I have my doubts but it needs reminding that the actual payout is 80% of the headline number due to the Drip.  The debt has been brought down by asset sales and by cash flow.  I am not seeing that the dividend is being paid out of asset sales.  These companies get favourable tax regulation such that EPS is not a good measure of available cash. 

This is a value investment in the true sense of the word.  We are buying a company way below its NAV, during a mild oil bust.  PWT is way ahead of most in deleveraging.  Most only start at this point in a bust.  So two upsides exist:  The oil price itself, and the ongoing cleanup of PWT. 
Title: Re: PWE - Penn West Petroleum
Post by: Sunrider on November 27, 2014, 12:33:37 PM
.... would you apply a similar logic to LTS.TO? I take it the management team receives mixed reviews but their netbacks seem to be great compared to PWT and others ...? Saw a write-up on buysidenotes.com a while ago and the thesis is that they are actually hitting a sustainability = 100% some time this year/early next.

Thanks - C.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on November 27, 2014, 04:31:44 PM
Just back from a brewing gig making Trooper; the beer of champions!

Thanking my lucky stars for hedging everything before we went, PWE included.
Its hard to see why PWE would not just cut the div, as the opportunity is heaven sent. It is highly likely that they will be just one of many cutting, but if/when the div is cut - PWE will drop like a brick. If it drops 1/4 to 1/3 it is going to be pretty hard to find something else with a similar quality/price ratio.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 27, 2014, 07:12:06 PM
.... would you apply a similar logic to LTS.TO? I take it the management team receives mixed reviews but their netbacks seem to be great compared to PWT and others ...? Saw a write-up on buysidenotes.com a while ago and the thesis is that they are actually hitting a sustainability = 100% some time this year/early next.

Thanks - C.

Dont know LTS.  PWT caught my eye when I learned Rick G. was in charge.  I was price comparing and saw that Penn Growth is in a very similar situation. 

Just back from a brewing gig making Trooper; the beer of champions!

Thanking my lucky stars for hedging everything before we went, PWE included.
Its hard to see why PWE would not just cut the div, as the opportunity is heaven sent. It is highly likely that they will be just one of many cutting, but if/when the div is cut - PWE will drop like a brick. If it drops 1/4 to 1/3 it is going to be pretty hard to find something else with a similar quality/price ratio.

SD

Its being priced for the dividend cut now.  Unfortunately management has backed themselves into a corner a bit by insisting the dividend is covered, as recently as last week. 
Title: Re: PWE - Penn West Petroleum
Post by: doc75 on November 28, 2014, 06:58:42 AM
Its being priced for the dividend cut now.  Unfortunately management has backed themselves into a corner a bit by insisting the dividend is covered, as recently as last week.

In my experience, dividend cuts are never "priced in".  Regardless of how expected the cut may be, it seems there's always an enormous drop in price once the hammer falls.   That said, there is very often a reasonably prompt rebound.

Agreed that management has painted themselves into a corner here.  I really don't understand why they'd do that.  Surely they understand that integrity and follow-through is of the utmost importance, so I was surprised they didn't temper their statements regarding the dividend.  As SD said, they couldn't find a better time to knock it back a little bit. 


Title: Re: PWE - Penn West Petroleum
Post by: cashisking on November 28, 2014, 08:59:53 AM
FWIW...

PWE (US traded) puts are offering the following returns to those willing to "underwrite" the stock:


Might be interesting to write cash backed puts and buy OTM leaps vs just buying the equity... One would not get the dividend in this scenario...
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 01, 2014, 12:13:47 PM
Quiet here. So is it fair to say that we surrendered?


.... would you apply a similar logic to LTS.TO? I take it the management team receives mixed reviews but their netbacks seem to be great compared to PWT and others ...? Saw a write-up on buysidenotes.com a while ago and the thesis is that they are actually hitting a sustainability = 100% some time this year/early next.

Thanks - C.

Dont know LTS.  PWT caught my eye when I learned Rick G. was in charge.  I was price comparing and saw that Penn Growth is in a very similar situation. 

Just back from a brewing gig making Trooper; the beer of champions!

Thanking my lucky stars for hedging everything before we went, PWE included.
Its hard to see why PWE would not just cut the div, as the opportunity is heaven sent. It is highly likely that they will be just one of many cutting, but if/when the div is cut - PWE will drop like a brick. If it drops 1/4 to 1/3 it is going to be pretty hard to find something else with a similar quality/price ratio.

SD

Its being priced for the dividend cut now.  Unfortunately management has backed themselves into a corner a bit by insisting the dividend is covered, as recently as last week.
Title: Re: PWE - Penn West Petroleum
Post by: tengen on December 01, 2014, 12:45:11 PM
I'm just admiring the loss I have incurred since buying earlier in the year.  Every time I thought it couldn't go lower, something happened and it went lower.  >:(

Not selling but will reassess my outlook in the new year. Surely it can't go lower.  ;)
Title: Re: PWE - Penn West Petroleum
Post by: indirect on December 01, 2014, 12:48:31 PM
Benj at Contra the heard put out a buy this AM for his subscribers upto $4.00 with a sell target of $21
Title: Re: PWE - Penn West Petroleum
Post by: Myth465 on December 01, 2014, 01:25:26 PM
I'm just admiring the loss I have incurred since buying earlier in the year.  Every time I thought it couldn't go lower, something happened and it went lower.  >:(

Not selling but will reassess my outlook in the new year. Surely it can't go lower.  ;)

This sums up my position.
Its getting a bit irrational, but Mr. Market can stay there longer than I can stay solvent.

I wonder how many cashed up entities are out there sniffing around the oil patch. Everything is truly on sale.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 01, 2014, 01:35:53 PM
Quiet here. So is it fair to say that we surrendered?


.... would you apply a similar logic to LTS.TO? I take it the management team receives mixed reviews but their netbacks seem to be great compared to PWT and others ...? Saw a write-up on buysidenotes.com a while ago and the thesis is that they are actually hitting a sustainability = 100% some time this year/early next.

Thanks - C.

Dont know LTS.  PWT caught my eye when I learned Rick G. was in charge.  I was price comparing and saw that Penn Growth is in a very similar situation. 

Just back from a brewing gig making Trooper; the beer of champions!

Thanking my lucky stars for hedging everything before we went, PWE included.
Its hard to see why PWE would not just cut the div, as the opportunity is heaven sent. It is highly likely that they will be just one of many cutting, but if/when the div is cut - PWE will drop like a brick. If it drops 1/4 to 1/3 it is going to be pretty hard to find something else with a similar quality/price ratio.

SD

Its being priced for the dividend cut now.  Unfortunately management has backed themselves into a corner a bit by insisting the dividend is covered, as recently as last week.

There is really not much to say. I bet many didn't surrender, some might have added. But there is just nothing to show. Sentiment shifted a lot in last few weeks, the demand/supply picture that I see should not warrant 40% drop.

Two years out, some of the companies we talked about here might no longer exists, some may be trading multiple times the current trading price.

Title: Re: PWE - Penn West Petroleum
Post by: Viking on December 01, 2014, 02:07:14 PM
Interesting that oil stocks continued to get punished (down 5%) even with oil prices rising a fair bit (3%). Crazy how the oil and gas assets are getting repriced so dramatically in 4 short months.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 01, 2014, 03:47:43 PM
I'm just admiring the loss I have incurred since buying earlier in the year.  Every time I thought it couldn't go lower, something happened and it went lower.  >:(

Not selling but will reassess my outlook in the new year. Surely it can't go lower.  ;)

This sums up my position.
Its getting a bit irrational, but Mr. Market can stay there longer than I can stay solvent.

I wonder how many cashed up entities are out there sniffing around the oil patch. Everything is truly on sale.

Me too.  I sold my original common position at a loss, bought a few leaps, waited the requisite 30 days, and started buying the common again.  I am down 25% on the new cheaper price. 

I wonder what Rick G. would take on a buyout?  Since his purchase price is around $8.00 I would think he would want $11.00 or so. 

Glad to hear Contra the Herd is/was buying. 
Title: Re: PWE - Penn West Petroleum
Post by: Eye4Valu on December 01, 2014, 04:16:26 PM
Who is Rick G.? That's not Rick Guerin is it?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 01, 2014, 04:25:10 PM
Who is Rick G.? That's not Rick Guerin is it?

PWT Chairman.  Former CEO Suncor.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 01, 2014, 04:52:37 PM
We're just sitting tight until the tax selling starts, & the year-end numbers get published.

SD
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on December 01, 2014, 05:06:34 PM
Here is an interesting article on Oil with demand and supply graph

http://www.valueplays.net/2014/12/01/oil-oil-oil-2/
Title: Re: PWE - Penn West Petroleum
Post by: doc75 on December 02, 2014, 06:09:58 AM
FWIW, very large insider purchase yesterday (US exchange):

https://insidertracking.com/node/7?menu_tickersearch=PWT*CA%20||%20Penn%20West%20Petroleum
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 02, 2014, 07:00:25 AM
FWIW, very large insider purchase yesterday (US exchange):

https://insidertracking.com/node/7?menu_tickersearch=PWT*CA%20||%20Penn%20West%20Petroleum

John Brydson, Director: Listed as a private investor (I guess he no longer holds an outside job):
150,000 shares yesterday - Total holdings ~350,000 shares. 
Title: Re: PWE - Penn West Petroleum
Post by: longlake95 on December 02, 2014, 07:14:45 AM
I too - have been shocked at the magnitude of the slide in oils. I keep thinking we've hit bottom! I added today a 3.74. I think it's some reflexivity at work. I also own YPF and it's hardly moved since the summer, I thought YPF would get pounded considering their oil is in an emerging market with an unpredictable government.

Nice to see more insider buying.

LL
Title: Re: PWE - Penn West Petroleum
Post by: Libs on December 04, 2014, 10:00:03 AM
file:///C:/Users/dvanov/Downloads/pennwest2014_3rdqtrresults%20(2).pdf

I'm trying to figure out the impact of oil staying down here, found this. P.17.

At $86 oil, they predicted ~$900MM funds flow in 2015.

They say every $1 drop in oil costs $20MM in funds flow.

Let's say 2015 averages $70 oil. That reduces FF by $320MM. Now they have ~$600MM.

PWE is currently planning:
 ~ $800MM in cap ex costs to maintain reserves
~200MM dividends
+ $225 MM in debt payable in 2015.

Total: $1.2B

Something has to give.....am I missing something here?

 

Title: Re: PWE - Penn West Petroleum
Post by: doc75 on December 04, 2014, 10:36:42 AM
Something has to give.....am I missing something here?

Nope.  I think you and the market are on the same page...
Title: Re: PWE - Penn West Petroleum
Post by: jawn619 on December 04, 2014, 10:54:05 AM
file:///C:/Users/dvanov/Downloads/pennwest2014_3rdqtrresults%20(2).pdf

I'm trying to figure out the impact of oil staying down here, found this. P.17.

At $86 oil, they predicted ~$900MM funds flow in 2015.

They say every $1 drop in oil costs $20MM in funds flow.

Let's say 2015 averages $70 oil. That reduces FF by $320MM. Now they have ~$600MM.

PWE is currently planning:
 ~ $800MM in cap ex costs to maintain reserves
~200MM dividends
+ $225 MM in debt payable in 2015.

Total: $1.2B

Something has to give.....am I missing something here?

Makes a lot of sense. I don't see a high MOS even from here. A lot of people are saying that it's getting really irrational but those assumptions don't seem overly pessimistic. Can anyone make a case for this that doesn't require oil at $90+?
Title: Re: PWE - Penn West Petroleum
Post by: Andy Dufresne on December 04, 2014, 11:20:37 AM
Most likely the dividend will be cancelled and the company will reduce its drilling program; however, they still have assets to dispose of that *may* bridge some of the gap
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on December 04, 2014, 12:22:50 PM
file:///C:/Users/dvanov/Downloads/pennwest2014_3rdqtrresults%20(2).pdf

I'm trying to figure out the impact of oil staying down here, found this. P.17.

At $86 oil, they predicted ~$900MM funds flow in 2015.

They say every $1 drop in oil costs $20MM in funds flow.

Let's say 2015 averages $70 oil. That reduces FF by $320MM. Now they have ~$600MM.

PWE is currently planning:
 ~ $800MM in cap ex costs to maintain reserves
~200MM dividends
+ $225 MM in debt payable in 2015.

Total: $1.2B

Something has to give.....am I missing something here?

Makes a lot of sense. I don't see a high MOS even from here. A lot of people are saying that it's getting really irrational but those assumptions don't seem overly pessimistic. Can anyone make a case for this that doesn't require oil at $90+?

This makes sense today. But what will oil prices be in one or two years? $80, $90? I have no idea. I would try to think of it from a probabilistic standpoint.  I like the leverage this stock provides from a potential return standpoint. Let's say the stock is fairly valued at today's oil prices roughly, you can make what appears to be a good risk adjusted bet. Buy $2 strike 2017 calls for $1.2 and perhaps make 5x. Or you are wrong and you lose 1x. Note that option is still well in the money today.
Title: Re: PWE - Penn West Petroleum
Post by: CanadianMunger on December 04, 2014, 03:01:37 PM
From the local paper today:

Penn West CEO stays positive as stock, oil prices slide

http://calgaryherald.com/business/energy/yedlin-penn-west-ceo-looks-forward

It all sounds good, but at least one sell-side analyst criticized Penn West for not cutting its dividend as part of its repositioning exercise.

And while the reasoning makes sense from the often-said perspective that dividends impose capital discipline, in certain circumstances it makes sense to bite the bullet.

But Roberts isn’t having any of it, at least, not now.

“In my view, you have to pay people to stay in the story with you as you go through this,” he said.


Hmm..

-CM
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 04, 2014, 03:09:02 PM
From the local paper today:

Penn West CEO stays positive as stock, oil prices slide

http://calgaryherald.com/business/energy/yedlin-penn-west-ceo-looks-forward

It all sounds good, but at least one sell-side analyst criticized Penn West for not cutting its dividend as part of its repositioning exercise.

And while the reasoning makes sense from the often-said perspective that dividends impose capital discipline, in certain circumstances it makes sense to bite the bullet.

But Roberts isn’t having any of it, at least, not now.

“In my view, you have to pay people to stay in the story with you as you go through this,” he said.


Hmm..

-CM

another CEO putting his reputation on the line based on the price of something he can't control. this guy is making a huge bet that oil prices are going back up.
Title: Re: PWE - Penn West Petroleum
Post by: doc75 on December 04, 2014, 06:21:29 PM
The official Penn West stance is that it is the longevity of a low-price environment that would cause them to alter their capital plans, as opposed to the particular trading price of the day.  I presume they'll lower the dividend if oil prices stay low even for a couple quarters.  That would be consistent with what they have been saying.

That said, I really don't understand why Roberts (who is a proxy for the board) has so emphatically supported the dividend.  The comment about keeping people in the "story" through tough times doesn't inspire confidence.


Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 04, 2014, 06:59:02 PM
The official Penn West stance is that it is the longevity of a low-price environment that would cause them to alter their capital plans, as opposed to the particular trading price of the day.  I presume they'll lower the dividend if oil prices stay low even for a couple quarters.  That would be consistent with what they have been saying.

That said, I really don't understand why Roberts (who is a proxy for the board) has so emphatically supported the dividend.  The comment about keeping people in the "story" through tough times doesn't inspire confidence.

I don't think it matters much. COS cuts, its get hammered, PWT keeps, its get hammered. People just want to get out.

Title: Re: PWE - Penn West Petroleum
Post by: adesigar on December 05, 2014, 12:25:08 AM
PWE is really interesting at this price. Do any of you know of other such Oil and Gas companies which have dropped as much as PWE? I was thinking of buying a basket of them. Thanks in advance.
Title: Re: PWE - Penn West Petroleum
Post by: undervalued on December 05, 2014, 10:29:33 AM
XCO, SD. I am thinking of doing the same. I have already own SD and XCO.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 02:06:12 PM
Prepare to lose a lot more soon.  I finally got sucked into this one.  I read the thread yesterday for the first time -- so glad to have ignored it.  Thanks to all who contributed to this thread.  And no, I have no experience at all in this sector.  Literally my first ever purchase in the oil/gas space.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 02:09:16 PM
Prepare to lose a lot more soon.  I finally got sucked into this one.  I read the thread yesterday for the first time -- so glad to have ignored it.  Thanks to all who contributed to this thread.  And no, I have no experience at all in this sector.  Literally my first ever purchase in the oil/gas space.

now for the real death knell; I bought yesterday.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 05, 2014, 02:27:10 PM
How come u always time it so good.
At least much better than many old owners.
Title: Re: PWE - Penn West Petroleum
Post by: turar on December 05, 2014, 02:48:43 PM
Prepare to lose a lot more soon.  I finally got sucked into this one.  I read the thread yesterday for the first time -- so glad to have ignored it.  Thanks to all who contributed to this thread.  And no, I have no experience at all in this sector.  Literally my first ever purchase in the oil/gas space.
I guess it's time to load up.  ;D
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 05, 2014, 02:48:54 PM
I bought at 4, presumably could laugh at guys who bought at 8, but now being laughed at by ppl bought at 2, however, I suspect these guys will be laughed at by guys buying this at 1...

How come u always time it so good.
At least much better than many old owners.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 02:49:53 PM
I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 03:07:27 PM
so, the funny thing to me about Penn West is the pricing on the bonds. All show up well above par on bloomberg and by no means look "distressed". Then you look at the stock and it's like "golly gee willikers batman this thang is going bankrupt". So someone is wrong; the bonds are a short or the stock is a buy. Bonds of stocks trading at 30% of tangible book don't trade above par, even if there is certainty they are money good, the kind of uncertainty that accompanies a stock like Penn West should pour over into other parts of the cap structure.

I asked around about the bonds  and they weren't on any US dealers runs; I assume they are traded by canadian banks if/when they trade at all. Almost all of the issues are 144A but also really small issuances (a weird combo) and very few had a list of holders on bloomberg to see who owned them. So no dice on the bonds (i would ask the more canadian and institutional here to look into this). If anyone can help me out with respect to the arcane details of canadian capital structure pricing and why this mismatch (which would not exist here in the US of A) exists, I'd be most appreciative. Go try to short those bonds at $120!

 When you move to the high yield US oil patch, you find real distress, things like Bakken producer emerald oil, whose converts are in the 50's, Paragon Offshore with it's bonds in the 50s that it issued 6 months ago, Sandridge has bonds in the 60's, XCO in the 70s, etc.

So in my opinion there is a disconnect. The stocks that are down like crazy in the US all have bonds that are pricing in some pain. Penn West is down like crazy, but its bonds are either not pricing or I don't see them pricing (they don't trade or bloomberg has bad data) or are not pricing in any pain.

And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.
Title: Re: PWE - Penn West Petroleum
Post by: BG2008 on December 05, 2014, 03:45:39 PM
Are any of those debt/bond traded on the exchange allowing people to buy via normal brokers?  Does anyone have a list of exchange traded debt/bond? 

so, the funny thing to me about Penn West is the pricing on the bonds. All show up well above par on bloomberg and by no means look "distressed". Then you look at the stock and it's like "golly gee willikers batman this thang is going bankrupt". So someone is wrong; the bonds are a short or the stock is a buy. Bonds of stocks trading at 30% of tangible book don't trade above par, even if there is certainty they are money good, the kind of uncertainty that accompanies a stock like Penn West should pour over into other parts of the cap structure.

I asked around about the bonds  and they weren't on any US dealers runs; I assume they are traded by canadian banks if/when they trade at all. Almost all of the issues are 144A but also really small issuances (a weird combo) and very few had a list of holders on bloomberg to see who owned them. So no dice on the bonds (i would ask the more canadian and institutional here to look into this). If anyone can help me out with respect to the arcane details of canadian capital structure pricing and why this mismatch (which would not exist here in the US of A) exists, I'd be most appreciative. Go try to short those bonds at $120!

 When you move to the high yield US oil patch, you find real distress, things like Bakken producer emerald oil, whose converts are in the 50's, Paragon Offshore with it's bonds in the 50s that it issued 6 months ago, Sandridge has bonds in the 60's, XCO in the 70s, etc.

So in my opinion there is a disconnect. The stocks that are down like crazy in the US all have bonds that are pricing in some pain. Penn West is down like crazy, but its bonds are either not pricing or I don't see them pricing (they don't trade or bloomberg has bad data) or are not pricing in any pain.

And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 05, 2014, 04:49:32 PM
I bought at 4, presumably could laugh at guys who bought at 8, but now being laughed at by ppl bought at 2, however, I suspect these guys will be laughed at by guys buying this at 1...

How come u always time it so good.
At least much better than many old owners.

I didn't foresee oil trading this low a few month back. 8 dollars was cheap will oil @ 100 with tight supply. $4 was cheap when oil @80. Probably cheaper than $3 with 65 oil.

The dividend was secured @80 USD oil but they will have to cut for 65$ if it last too long.


Title: Re: PWE - Penn West Petroleum
Post by: doc75 on December 05, 2014, 04:54:52 PM
I didn't foresee oil trading this low a few month back. 8 dollars was cheap will oil @ 100 with tight supply. $4 was cheap when oil @80. Probably cheaper than $3 with 65 oil.

The dividend was secured @80 USD oil but they will have to cut for 65$ if it last too long.

They did give themselves an "out" with regards to the dividend.  They emphasized that they'll make their capital plans (including dividend, presumably) based on the duration of low prices, as opposed to a particular one-off low price threshold. 

I'm sure you're right about a cut if oil is at $65 or lower for a quarter or two.

I just don't like Roberts' recent statement about having to pay people to stay "in the story".  I hope the conversation around the boardroom table is a little different!
Title: Re: PWE - Penn West Petroleum
Post by: Scudbucket on December 05, 2014, 05:03:20 PM
If the dividend gets cut now or in a couple of months because oil stays this low, does that matter for the next couple of years if oil trades back up?  If you buy this low, given the assets, I think the probability is high that an investment will be positive in a couple of years.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 05, 2014, 05:06:05 PM
I guess you are fine with the extreme senario in which the low oil price lingers for more than 3 years and PWE cannot sell its non-core assets and run into a solvent issues ...

I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 05:22:01 PM
I guess you are fine with the extreme senario in which the low oil price lingers for more than 3 years and PWE cannot sell its non-core assets and run into a solvent issues ...

I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.

The scenario you mention was just as real when oil traded above $100.  High price produces profitable drilling of expensive oil -- this raises supply and that can lead to lower prices.  They even have a term for this "shale boom" and much has been written about it.  The difference is that now we have better risk/reward because there is much more upside if that oilmageddon doesn't play out.

The PWE investment is 2% of my total net worth.  I can increase into the remaining survivors when the end draws nigh.

So I'm still acting cautious.

Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 05, 2014, 05:23:57 PM
:) Well said !
let us know when you make a major bet into this sector... !!

I guess you are fine with the extreme senario in which the low oil price lingers for more than 3 years and PWE cannot sell its non-core assets and run into a solvent issues ...

I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.

The scenario you mention was just as real when oil traded above $100.  High price produces profitable drilling of expensive oil -- this raises supply and that can lead to lower prices.  They even have a term for this "shale boom" and much has been written about it.  The difference is that now we have better risk/reward because there is much more upside if that oilmageddon doesn't play out.

The PWE investment is 2% of my total net worth.  I can increase into the remaining survivors when the end draws nigh.

So I'm still acting cautious.
Title: Re: PWE - Penn West Petroleum
Post by: Scudbucket on December 05, 2014, 05:25:31 PM
I agree with Ericopoly, the risk/reward is much different now than at $100.  If you believe investing is a probabilistic endeavor, which I do, then yes, at this price, long-term, I think it is an attractive opportunity.  Of course, the outcome may not be good, but the important thing is the process and thinking that goes into the decision.  You never get everything right, but as long as the process is sound, over time, hopefully you tilt the odds so you're right 60% of the time.  If you do that, over and over, I think you'll be fine.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 05, 2014, 05:53:43 PM
>>the risk/reward is much different now than at $100

true if you have good read on oil price going forward.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 06:11:25 PM
>>the risk/reward is much different now than at $100

true if you have good read on oil price going forward.

And I don't.  Which is why I'm not willing to pass up on buying today.  Yet not willing to let it get too expensive.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 05, 2014, 06:30:53 PM
>>the risk/reward is much different now than at $100

true if you have good read on oil price going forward.

And I don't.  Which is why I'm not willing to pass up on buying today.  Yet not willing to let it get too expensive.

Smart man. All I have to do all along was to start copying your moves few years ago. Life would be so much better now. :)
Title: Re: PWE - Penn West Petroleum
Post by: adesigar on December 05, 2014, 07:05:22 PM
I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.

What was your rational behind 60% into PWE vs an equal split? What do you think is a fair value range for PWE?

After Enron and World Com I put equal amounts in the survivors, some went to zero but the winners more than made up for it.




Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 07:18:22 PM
I also bought my first SD, XOM, LUKOY, OGZPY.  All today.  Something I bought will get slaughtered no doubt -- probably not XOM though.  60% of the money went into PWE, 20% into XOM, the other 3 split evenly.

What was your rational behind 60% into PWE vs an equal split? What do you think is a fair value range for PWE?

After Enron and World Com I put equal amounts in the survivors, some went to zero but the winners more than made up for it.

I defer to the rest of the thread as to where fair value is for PWE -- it all depends on whether this is a temporary or permanent oil price.  If T. Boone Pickens is right, I may have a 10x return. 

I bought the others in smaller amounts because of various reasons.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 08:05:28 PM
Are any of those debt/bond traded on the exchange allowing people to buy via normal brokers?  Does anyone have a list of exchange traded debt/bond? 

well I don't really know of any bonds that are "exchange traded" with the exception of like baby bond GE retail notes or something. But you can still buy bonds through your broker.

 you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

the energy high yield universe has widened out by 300 bps to 8.5% YTM (energy is 20% of HY btw so that whole "we are in an era of 1% junk default rates" thing may a little off  ;D )  but the more hairy names are at mid teens yields.



Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 05, 2014, 08:39:42 PM
And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.

Quote
you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

You think AAMC is crooked but not EOX, SD, etc. ? 

In my opinion, I would put stocks in the following tiers based on integrity (highest to lowest):

BRK.A

AAMC and KMI (pre-merger KMI)

XOM/Exxon, MCF

CLR, Peyto

SD CHK

Average piece of **** smallcap independent E&P.  e.g. REXX. 

Worldcom, Penn West

EOX, MILL     yes, EOX is worse than Worldcom.

-----------

Guys... a lot of these stocks have terrible management teams.  The ones that sold off the most have the worst management teams.  They are the ones who deceive shareholders the most.

You know that the typical independent E&P inflates their reserves right?
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 05, 2014, 08:52:15 PM
A company like CHK in the U.S. has to drill to hold the lease
Does PWE have the same issue? Can it stop drilling those uneconomic wells under the current price without losing the lease?

Are any of those debt/bond traded on the exchange allowing people to buy via normal brokers?  Does anyone have a list of exchange traded debt/bond? 

well I don't really know of any bonds that are "exchange traded" with the exception of like baby bond GE retail notes or something. But you can still buy bonds through your broker.

 you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

the energy high yield universe has widened out by 300 bps to 8.5% YTM (energy is 20% of HY btw so that whole "we are in an era of 1% junk default rates" thing may a little off  ;D )  but the more hairy names are at mid teens yields.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 09:36:40 PM
And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.

Quote
you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

You think AAMC is crooked but not EOX, SD, etc. ? 

In my opinion, I would put stocks in the following tiers based on integrity (highest to lowest):

BRK.A

AAMC and KMI (pre-merger KMI)

XOM/Exxon, MCF

CLR, Peyto

SD CHK

Average piece of **** smallcap independent E&P.  e.g. REXX. 

Worldcom, Penn West

EOX, MILL     yes, EOX is worse than Worldcom.

-----------

Guys... a lot of these stocks have terrible management teams.  The ones that sold off the most have the worst management teams.  They are the ones who deceive shareholders the most.

You know that the typical independent E&P inflates their reserves right?

I have no opinions on any of those (SD, EOX etc.) I only brought them up to point out what I saw as a pricing anomaly. This priced for future distress guys in the US bonds have all traded down significantly and PWE's are all marked at par on Bloomberg. I have investigated this but could not find a US investment bank that trades those bonds (or at least they are not sent out on normal energy runs that the dealers send out). That's all I was saying. Then someone asked about the ability to buy bonds and I said you could buy those crappy company bonds till your hearts desire; IB allows you to do so, except the EOX converts were 144A. I never expressed an opinion about crookedness.

 I have a small position in PWE and PWE options because I like leverage on  leverage on leverage on stocks that are down 70% and look like they can survive; $2B of debt doesn't seem insurmountable. May I lose my shirt on the position? Oh yes!It is sized as such. PWE looks like it was a giant piece of shit of a  company under old management and new management's ridiculous stubbornness about the dividend that should immediately be cut to zero isn't exactly confidence inspiring.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 09:37:47 PM
oh and bill erbey sucks  ;D
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 05, 2014, 09:54:17 PM
oh and bill erbey sucks  ;D

Touche.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 05, 2014, 09:59:15 PM
but in all seriousness, Glenn, it would be great to hear your perspective on the independent oil and gas names. What names are you covering first? Are you pressing any particular shorts? Who do you think kicks the bucket first? Are there any out there you would buy? I mean if there's anyone here who is intimate with the wonderful world of no value creating independent e+p companies, it is you.

EDIT: Nevermind, it's getting late and I forgot to check your blog
Title: Re: PWE - Penn West Petroleum
Post by: argonaut on December 05, 2014, 10:51:14 PM
@ericopoly any thoughts on CHK?
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 05, 2014, 10:54:16 PM
@ericopoly any thoughts on CHK?

I haven't read that thread yet.
Title: Re: PWE - Penn West Petroleum
Post by: sswan11 on December 06, 2014, 12:18:59 AM
How about BP?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 06, 2014, 04:55:15 AM
And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.

Quote
you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

You think AAMC is crooked but not EOX, SD, etc. ? 

In my opinion, I would put stocks in the following tiers based on integrity (highest to lowest):

BRK.A

AAMC and KMI (pre-merger KMI)

XOM/Exxon, MCF

CLR, Peyto

SD CHK

Average piece of **** smallcap independent E&P.  e.g. REXX. 

Worldcom, Penn West

EOX, MILL     yes, EOX is worse than Worldcom.

-----------

Guys... a lot of these stocks have terrible management teams.  The ones that sold off the most have the worst management teams.  They are the ones who deceive shareholders the most.

You know that the typical independent E&P inflates their reserves right?

You rate Pennwest with Worldcom?  Why is that?  That is quite an assertion with no proof and no apparent analysis. 

I agree on SD, and CHK
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 06:39:20 AM
And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.

Quote
you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

You think AAMC is crooked but not EOX, SD, etc. ? 

In my opinion, I would put stocks in the following tiers based on integrity (highest to lowest):

BRK.A

AAMC and KMI (pre-merger KMI)

XOM/Exxon, MCF

CLR, Peyto

SD CHK

Average piece of **** smallcap independent E&P.  e.g. REXX. 

Worldcom, Penn West

EOX, MILL     yes, EOX is worse than Worldcom.

-----------

Guys... a lot of these stocks have terrible management teams.  The ones that sold off the most have the worst management teams.  They are the ones who deceive shareholders the most.

You know that the typical independent E&P inflates their reserves right?

You rate Pennwest with Worldcom?  Why is that?  That is quite an assertion with no proof and no apparent analysis. 

I agree on SD, and CHK

I figure he is referring to the expenses that were capitalized to juice reported earnings.  I chalked it up to old management.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 06:49:53 AM
How about BP?

Didn't think of looking there yet.
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 06, 2014, 07:20:29 AM
You rate Pennwest with Worldcom?  Why is that?  That is quite an assertion with no proof and no apparent analysis. 

I agree on SD, and CHK

It's an opinion.  I'm not impressed by their old accounting.

I shorted both SD and CHK briefly (before the collapse in their share prices).
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 06, 2014, 11:18:56 AM
And to my untrained and admittedly ignorant of the ways of oil and gas self it doesn't really look all that distressed. Penn West has $7.7B of tangible assets and a $4B EV with its maturities well termed out and plenty of growth capex and dividends to cut to avoid an all out fire sale in order to delever. the dividend alone would cover their interest costs, so just cut that bitch to zero and use the saved cash flow to service the debt, and maybe stop trying to grow production by 40% over 5 years.

Anyways that's my ignorant Penn West thesis : cut dividend, lower capex, sell some assets at "not quite firesale", balance sheet problem solved then wait for turn in cycle.

Quote
you can buy everyone  i mentioned (XCO, SD, PGN) on IB, except for EOX converts which are 144A (so only for QIB's). An author on VIC says PGN unsecureds are a zero so $55 may turn out to be very expensive!!! 

You think AAMC is crooked but not EOX, SD, etc. ? 

In my opinion, I would put stocks in the following tiers based on integrity (highest to lowest):

BRK.A

AAMC and KMI (pre-merger KMI)

XOM/Exxon, MCF

CLR, Peyto

SD CHK

Average piece of **** smallcap independent E&P.  e.g. REXX. 

Worldcom, Penn West

EOX, MILL     yes, EOX is worse than Worldcom.

-----------

Guys... a lot of these stocks have terrible management teams.  The ones that sold off the most have the worst management teams.  They are the ones who deceive shareholders the most.

You know that the typical independent E&P inflates their reserves right?

I have no opinions on any of those (SD, EOX etc.) I only brought them up to point out what I saw as a pricing anomaly. This priced for future distress guys in the US bonds have all traded down significantly and PWE's are all marked at par on Bloomberg. I have investigated this but could not find a US investment bank that trades those bonds (or at least they are not sent out on normal energy runs that the dealers send out). That's all I was saying. Then someone asked about the ability to buy bonds and I said you could buy those crappy company bonds till your hearts desire; IB allows you to do so, except the EOX converts were 144A. I never expressed an opinion about crookedness.

 I have a small position in PWE and PWE options because I like leverage on  leverage on leverage on stocks that are down 70% and look like they can survive; $2B of debt doesn't seem insurmountable. May I lose my shirt on the position? Oh yes!It is sized as such. PWE looks like it was a giant piece of shit of a  company under old management and new management's ridiculous stubbornness about the dividend that should immediately be cut to zero isn't exactly confidence inspiring.

 What am I missing with everyone promoting that the div should be cut. Last numbers I saw, unless it has changed recently, the div was a very small cash cost to the company. Yeh it's diluting the shares, but so are all the options that they keep putting out, yet you hardly hear a boo of concern about that with the price fall. My understanding is the short shares are the ones that have to come up with the cash for the div on the shares they are short, please correct me if my understanding of  that is incorrect.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 12:23:46 PM
My uninformed opinion:

the stock is distressed. EV / Tangible Assets is about $4B / $7.7B = 51%, and price to tangible equity is 28%. At current prices,  they don't have the cash flow to service and pay down debt, pay dividends, and fund the desired capex program (as pointed out in earlier posts).

the market is valuing this company's assets at 51 cents on the dollar  and the common allows you to buy the first loss tranche for 28 cents on the dollar using the debt as leverage. the options market in turn allows you to lever that first loss tranche (for example I sold the $1.00 put and bought the $3.00 call for a net cost of $.65, so my risk is $1.65 if this is a goose egg (not unlikely) and my home run scenario is its worth $8.00 or even $10.00 in which case my call is worth $5-$7 on $1.65 of risk (300-420%). The crazy home run scenario is even better, of course, but I'm not going to even go there.

So how do you lose money buying distressed assets?

1) the assets ain't worth what they say they are. former management manipulated earnings and gross assets (before depletion and depreciation) ballooned from $3B to $20B over 10 yrs (lots of acquisitions and capex), they probably overpaid for a ton of stuff and just bought baby bought and drilled baby drilled, they were serial equity and debt issuers and we already have seen a couple cockroaches.

2) they are forced to sell assets below fair value to pay down debt and that dollar you bought for 50 cents was sold for 30 cents.

3) they do a massive dilutive equity offering to save their ass and stay in their positions and prevailing market prices drag per share intrinsic value down

4) oil collapses further stays down there and all bets are off


Giving cash to shareholders in the form of a dividend only de-risks the shareholders' position by the amount paid and makes the company weaker and the disaster scenarios more likely. I don't want to get paid 17% for 2 years just to lose 100% when they can't roll over their debt and fund maintenance capex and file in order to get out of it.

When you are in a distressed situation, you need to prevent a forced reckoning at all costs. The dividend just isn't compatible with the current situation (unless the stock market is just completely off and PWE is doing just fine; I've yet to see this argument and looking at the financials doesn't make me think that).

I don't understand this idea of "paying people to be in the story". The story has changed. The capital markets have effectively shunned you from raising equity by marking down your stock by 70% and we don't know how debt guys will feel about refinancing them (since I can't find real bond prices).

Any cash used to pay shareholders increases the likelihood of future destruction. I'd love to hear an argument for the dividend. All I've done is read this thread, skimmed over the guru focus 10 yr financials, the recent news and a few of the more recent financial filings. It's a small hyper levered position from which I expect future pain. 
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on December 06, 2014, 12:28:00 PM
I think the issue is that the dividend costs $220 million per year.  With $90 oil, they generate about $930m in CFO and have $840 m in cap-ex planned.  However with $70 oil, the CFO declines to an estimated $530 m (not enough to cover cap-ex (which includes growth) and current divy).  Based upon there latest plan about $100m cap-ex is maintenance (which I am assuming means declining production from existing fields).  The estimate production growth with the $750 m cap-ex is 8% per year on a BoE basis.  The question in my mind is how much growth is cut back if growth cap-ex is closer to $430 m per year.  They clearly have the ability to slow the growth and maintain the dividend which is what they should do if the prices stay low in any case.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 01:03:33 PM
The 2017 $3 strike put (9 cents in the money) has a $1.50 "ask". 

I might add that if they raise the annual dividend to 71 cents and cut back harder on capex, you've got a completely free option.

So is cutting the dividend back really what's best for you?
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 01:12:53 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 06, 2014, 01:13:50 PM
I suppose the CFO is before paying interests? They have some debt so they need to pay interests also

I think the issue is that the dividend costs $220 million per year.  With $90 oil, they generate about $930m in CFO and have $840 m in cap-ex planned.  However with $70 oil, the CFO declines to an estimated $530 m (not enough to cover cap-ex (which includes growth) and current divy).  Based upon there latest plan about $100m cap-ex is maintenance (which I am assuming means declining production from existing fields).  The estimate production growth with the $750 m cap-ex is 8% per year on a BoE basis.  The question in my mind is how much growth is cut back if growth cap-ex is closer to $430 m per year.  They clearly have the ability to slow the growth and maintain the dividend which is what they should do if the prices stay low in any case.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 01:28:31 PM
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.

What gives you the impression that I believe they will raise or maintain the dividend? 

Is it because I pointed out that a higher dividend would cover the current cost of hedging?

You could find worse things to worry about than free hedging.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 01:34:20 PM
I might add that if they raise the annual dividend to 71 cents and cut back harder on capex, you've got a completely free option.

I don't think you do. But you said that if they raise it that put is free. That put ain't going to be free if/when they cut. I'd be more inclined to sell puts/buy calls (take a stance against the dividend) than to bet on continued dividend.

I worry about them keeping the dividend and endangering the company and making disaster more likely. I don't really worry about upside or growth. All they need to do is ensure survival and we win. Dividend incrementally decreases chance of survival.

Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 01:45:21 PM
If

 ;) ;) ;)

Okay, now where were we...

Someone pointed out the dividend policy as a risk.  I'm merely showing how the "risk" is in the eye of the beholder.

If it's a risk then hedge for it, and then be pleasantly surprised at how what once seemed like a risk is actually the opposite.  The risk then becomes if they cut it. 

The ideal scenario is you worry so bad about management that you hedge for it, and then you are relieved to find out that the management turns out to be far worse than you thought and actually raises the dividend.

So if one's mind is made up either way about the dividend, it's not a reason to avoid the name.

It becomes harder if you can't read them, like me.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 01:54:23 PM
yep, I think we agree that what management does with the divvy is uncertain and a risk.

 I am indeed taking the risk that they maintain the dividend because I sold puts to buy calls (so greater than expected dividends will hurt my performance relative to other ways of being long).

I'm not avoiding the name. I own it despite my worries because I think it's priced for very very high upside if the disaster scenario does not play out.

My interests, as a just bought in shareholder with no hangups about where the stock or dividend was or has been, is simply for the company to hunker down, reduce the likelihood of Armageddon, and reprice the stock from "holy shit this is going bankrupt and they are going to fire sale all their assets" to "ooohh some assets at a discount with the balance sheet problem solved". That's our event path to the first 100%, in my opinion and that's why I'm so adamantly against the divvy.

If they can  do it all (delever, invest, maintain divvy) at once then that's okay too and we'll all make money, but I'm not worried about them doing it all. I'm worried about them trying to hold on to the divvy (and/or aggressive growth plans) and screwing themselves (and us) over.

anyways i think i've explained why i hate the dividend.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 02:10:33 PM
I've been mulling it over today...

Like you say, the options market is already pricing in a cut.

So I'm more inclined to buy puts -- this way it won't stress me out if the dividend stays intact, in fact it would benefit me and would make it cheaper than going with calls.

And although I'd suffer a bit of decay if the dividend gets cut sooner than the options market expects, it would still be a positive event overall in terms of improving the future upside potential.

So for my emotional wellbeing and positive spiritual good feelings, I choose the puts+common as it will make me a happier shareholder however management ultimately decides on this issue.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 02:13:54 PM
i thought about doing that, but even with a priced in cut, it still seemed like a pretty disadvantaged way of being long. I mean buying the ATM cost 50% of the stock as you pointed out, which seems to increase risk rather than reduce it and not give you much leverage. Which strike did you buy?

EDIT: I think the cumulative 2 yr dividend priced in is around 60 cents, btw, if i remember correctly. versus the run rate 50 cents/year for $1.00.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 02:35:30 PM
i thought about doing that, but even with a priced in cut, it still seemed like a pretty disadvantaged way of being long. I mean buying the ATM cost 50% of the stock as you pointed out, which seems to increase risk rather than reduce it and not give you much leverage. Which strike did you buy?

I haven't bought the options yet.  Still thinking that one out. 



Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 06, 2014, 02:40:45 PM
EDIT: I think the cumulative 2 yr dividend priced in is around 60 cents, btw, if i remember correctly. versus the run rate 50 cents/year for $1.00.

I thought about saying that earlier but I hesitated as I don't know what the borrow cost is on the shares.  Even non dividend paying stocks have options that get sometimes strongly out of put/call parity, due to the cost of borrow.

So I can't say for sure.
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 06, 2014, 03:00:27 PM
I think the issue is that the dividend costs $220 million per year.  With $90 oil, they generate about $930m in CFO and have $840 m in cap-ex planned.  However with $70 oil, the CFO declines to an estimated $530 m (not enough to cover cap-ex (which includes growth) and current divy).  Based upon there latest plan about $100m cap-ex is maintenance (which I am assuming means declining production from existing fields).  The estimate production growth with the $750 m cap-ex is 8% per year on a BoE basis.  The question in my mind is how much growth is cut back if growth cap-ex is closer to $430 m per year.  They clearly have the ability to slow the growth and maintain the dividend which is what they should do if the prices stay low in any case.

Packer

 My point is the $220 m isn't the cash cost they need as a large percent is or was in DRIP. Another thought is  a lower cap-ex may actually go further as they might be able to squeeze more out of the service companies looking for work.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 03:52:40 PM
I think the issue is that the dividend costs $220 million per year.  With $90 oil, they generate about $930m in CFO and have $840 m in cap-ex planned.  However with $70 oil, the CFO declines to an estimated $530 m (not enough to cover cap-ex (which includes growth) and current divy).  Based upon there latest plan about $100m cap-ex is maintenance (which I am assuming means declining production from existing fields).  The estimate production growth with the $750 m cap-ex is 8% per year on a BoE basis.  The question in my mind is how much growth is cut back if growth cap-ex is closer to $430 m per year.  They clearly have the ability to slow the growth and maintain the dividend which is what they should do if the prices stay low in any case.

Packer

 My point is the $220 m isn't the cash cost they need as a large percent is or was in DRIP. Another thought is  a lower cap-ex may actually go further as they might be able to squeeze more out of the service companies looking for work.


it will still be a large portion of their pro-forma (for oil price drop) operating cash flow. Even if the cash cost is just $100MM, that's 20% of the Packer-estimated $530MM.

Another benefit  of cutting is to drive the last of the income oriented shareholders out of the stock and remove the overhang of the fear of the dividend cut and allow the "i'll buy when they cut the dividend" deep value guys to step in more aggressively; I know I'd be a little bigger if they cut to zero (it'd also give me more faith in management).  I think it would be beneficial for both the medium term stock price to get the cut over and done with AND the long term health of the company.

Rip the band-aid off, increase odds of survival. Err on the side of caution/paranoia. Have no vision. Cut growth and hunker down. Be fearful when you should be fearful. don't try to do some dividend maintaining  tightrope walk to keep the yield pigs happy. slaughter them for the better of the company!  ;D
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 06, 2014, 04:07:45 PM
You might want to ask yourself why they wouldn't cut the div to zero, AND drastically cut back Capex in the face of $70 oil; & then quietly start buying back their stock if the worst doesn't happen - as forecast. And if you're going to cut the div; wouldn't you also try to write off everything that you possibly could, include it in the year-end audit - & blame it the old management?

Its got quite a way to go yet.

SD
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 04:16:53 PM
You might want to ask yourself why they wouldn't cut the div to zero, AND drastically cut back Capex in the face of $70 oil; & then quietly start buying back their stock if the worst doesn't happen - as forecast. And if you're going to cut the div; wouldn't you also try to write off everything that you possibly could, include it in the year-end audit - & blame it the old management?

Its got quite a way to go yet.

SD

Sharper, forgive me, but I don't know what you saying. Can you elaborate? I think it would be great for them to cut to zero and write down a bunch of assets. Are you agreeing? Or are you saying that there is some reason they are not doing so? Or are you saying "patience, pupil, they still need to do those things for the stock to bottom"? Or are you saying "pupil, they are in better shape than you think, they still have a way to go before they do all those things"
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 06, 2014, 06:15:11 PM
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?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 06, 2014, 06:18:50 PM
Right now PWT is being hit by the perfect storm. 

We have oil prices tanking just ahead of tax loss selling season.  And what a tax loss it is.  Management seems to be saying that for now things are under control.  If they let the dividend run another quarter to see what unfolds, the give up 40-45 M post DRIP.  Its not going to kill them.  Management has been through multiple cycles.

I see announcements coming out all over the place about reductions in Capex at other companies. PWT had already done some of this work during their turnaround which in my mind puts them further ahead.  The culture of waste at PWT has been reined in. 

Service companies are the ones who are really going to suffer in the medium term.  The cost side of an E&Ps equation is going to drop in a lagged fashion to the price of oil. 

At some point the reduction in production will cause prices to swing.  Oil operates on a tight cycle, unlike mining, or alot of manufacturing, that requires long layoff times, and long ramp up times.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 06, 2014, 06:20:16 PM
This is just like the old days on the BAC thread....
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 06, 2014, 06:20:23 PM
how many people reinvest their dividend (this is dumb to do btw)?  maybe that's why they are reluctant to cut it?
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 06, 2014, 06:33:51 PM
As the previous posts mentioned, PWT debt is still at par
so this is the confusing part...

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?
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 06, 2014, 06:43:26 PM
As the previous posts mentioned, PWT debt is still at par
so this is the confusing part...

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?

bloomberg isn't always correct. that is my only source. someone who has connections to canadian sell side (or wherever those are traded) will have to get the real prices of the debt, which may not be what is on bloomberg
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 06, 2014, 06:44:06 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 06, 2014, 07:17:38 PM
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.

how is "maintaining it" working for pwt?
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on December 07, 2014, 04:19:57 AM
why not buy the 2$ 2017 puts for 60 cents?

Also isn't part of this hedge, if oil goes up by end of 2015, dividend will return. And so upside for the stock pays off for the put option as well.

The only way this can go bad is if they cut dividend quickly, and oil stays low for the next 2 years.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 07, 2014, 05:24:24 AM
You're all barking up the wrong tree. 

The reason the debentures are still not trading down is because most of the recent drop in the stock price is tax loss selling, and concerns the dividend will be cut.  The company is not under financial duress, yet. 

There are reasons the dividend has not been cut:
1) PWT is part of the tsx 60.  They are taking this into consideration.
2) Management are large shareholders. 
3) The DRIP
4) So far, they can afford it.  They cut the dividend massively when Rick George took over, before the CEO was replaced.  The dividend was stress tested at the time. 

That being said, if oil prices stay down the dividend will go.  For that reason all of my purchases recently have been 2017 Leaps, and I am going to keep right on buying small amounts of these into the year end.  It doesn't increase my position size very much at these prices.

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 07, 2014, 07:30:00 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Picasso on December 07, 2014, 08:36:50 AM
There are hundreds, if not more, oil and gas stocks that have been decimated.  Why is PWE particularly compelling versus some other hard hit securities?  Aside from the fact it has lost almost all of its value.

I have never been much of a believer in tax loss selling affecting the share price in a big way.  Maybe it contributes to some of the decline but I don't think you can blame most of it on it.  In fact I would be nervous taking a tax loss in PWE here.  If it is as cheap as everyone thinks, you run the risk of a massive rally in less than 30 days which screws up any tax savings you are trying to achieve.
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on December 07, 2014, 08:56:45 AM
Below is part of an email between Joel S and I.  I asked if it would be worth it to post these ideas and perhaps ignite a firestorm.  Anyways... here goes. 

I generally avoid oil and gas unless I am absolutely sure I am buying the low cost producer.  Never ever forget that when you buy oil and gas you are essentially buying the underlying commodity.  I have no way of telling where oil will go today, or tomorrow, so that is why I typically shy away from commodities.  I only buy if I see a huge margin of safety. 
 
I have industry experience, and I understand the business and valuations.  What most people don't understand is how lower oil prices influences so many factors.  It is not just your near term cash flow.  Reserves will be cut, bankers will be worried, asset write downs will occur in Q4, debt covenants may be broken, and bank lines will be curtailed.  Then add in tax loss selling and the oil sector is in for some pain over the next few months. 
 
I'll take a look at the names you mentioned.  I hope you can see from the MEG graph that the relationship between WTI and asset value per share is very non linear.  Many on COBF believe you can just can apply a discount to account for the falling oil prices. 

As for Penn West, here are my thoughts.  First, balance sheet and book values are useless in valuing an O&G firm, I see some making that mistake.  I value using the before tax net present value of reserves discounted at 10 or 15% and add any other assets the company has (at cost) and deduct all debts.  For PWT here is the results.  Please keep in mind that the reserve data is stale, they have made two asset divestments this year ($355 million in Q4 and $175 million early this year).  I made some quick and dirty assumptions to account for this, and I corrected the balance sheet.  The reserve report is based on $90 WTI near term pricing and I made no corrections for the drop in oil prices.  You can add your own haircut to the numbers below.

All number in Canadian $, PDP = Proven developed producing, 1P = Proven reserves, 10 or 15 = discount rate, BT = Before tax.

Current Share price = $3.33/Share

PDP10BT - $3.48/share
PDP15BT - $1.61/share

1P10BT - $6.14/share
1P15BT - $3.31/share

So if oil was still selling for $90 or if you knew it would go back to that level next year, Penn west is a solid investment and meets my hurdle of 15%.  If you believe oil is going to stay at the $70 level, you will need to cut these numbers appropriately, and significantly.  Most of the value in a NPV calculation is the near term cash flows, as you already know. 

If these numbers interested me, which they don't, I would then have to look at the CF need to fund the capex and debt obligations.  The reserve report tells you the capital require to convert proven undeveloped reserves (PUDs) into PDP.  As you can see above, quite a bit of the 1P value is PUDs, not PDP. 

You're likely over all my rambling but to add further insult to injury, Penn west has the follow capex assumptions baked into their reserve report, see page A3-8.

Forecast Prices and Costs
 
Year
 Proved Reserves
(MM$)
 Proved Plus Probable Reserves (MM$)
 
2014
1P -  704
2P - 840
 
2015
1P - 973
2P - 1,533
 
2016
1P - 419
2P - 726
 
At the end of Q3 they had spent $485 million in capex.  Q4 will have to be curtailed due to the drop in oil prices and reduced CF.  There is no way in China they will be spending a billion dollars to develop their proven reserves, let alone the over $1.5 billion needed for the 2P reserves next year. 

And don't get me started on the dividend.  Why do these crony companies pay a dividend when they don't earn a profit?  It is purely to fool private investors who will pay for yield.  To me it is almost a legal Ponzi scheme where they constantly raise more equity to pay off the prior shareholders.  Take Crescent Point, CPG, they have made no money in the past 10 years but have effectively used their over priced equity to raise more of it or use it to buy other companies. 

One last word of caution.  Be wary of the NAV numbers touted by analysts.  If you read the fine print it is often based on a huge number of assumptions the analysts have added.  They also then blend it with a CF multiple, which they feel is accurate, and reach their target price.  All nonsense.  Also throw out all company presentations, all nonsense.  Also when you hear people say the company can drill 100% ROR wells, ask them why don't you see all these nonsense ROR's coming out the back end of the company, in the reported financial statements?  Full cycle and full cost accounting have a way of bringing these projections back to reality.
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on December 07, 2014, 09:12:14 AM
I don't think the stock is very interesting here, but the fact that the options seems to be mispriced?

You can basicly hedge your risk for free?

Buy puts and common,

In scenario where dividend is not cut or only partially, you get back part or all of your hedge through dividends in common and from the puts? If it then goes up, you win with the common, and your hedge is almost free

In a scenario where they survive, and dividend is cut, oil price most likely goes up within the next few years, and the stock is a multibagger

In a scenario where they don't cut dividend, and stock goes down within a few years with bad management, you get paid on your put, and you get some dividends from common and put. You lose most of common, but you get the put for free. And there is still upside because of your put position

So only really the scenario where they go under and cut dividend is bad. But that seems unlikely with the CFO they generate. 
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 09:33:20 AM
Below is part of an email between Joel S and I.  I asked if it would be worth it to post these ideas and perhaps ignite a firestorm.  Anyways... here goes. 

I generally avoid oil and gas unless I am absolutely sure I am buying the low cost producer.  Never ever forget that when you buy oil and gas you are essentially buying the underlying commodity.  I have no way of telling where oil will go today, or tomorrow, so that is why I typically shy away from commodities.  I only buy if I see a huge margin of safety. 
 
I have industry experience, and I understand the business and valuations.  What most people don't understand is how lower oil prices influences so many factors.  It is not just your near term cash flow.  Reserves will be cut, bankers will be worried, asset write downs will occur in Q4, debt covenants may be broken, and bank lines will be curtailed.  Then add in tax loss selling and the oil sector is in for some pain over the next few months. 
 
I'll take a look at the names you mentioned.  I hope you can see from the MEG graph that the relationship between WTI and asset value per share is very non linear.  Many on COBF believe you can just can apply a discount to account for the falling oil prices. 

As for Penn West, here are my thoughts.  First, balance sheet and book values are useless in valuing an O&G firm, I see some making that mistake.  I value using the before tax net present value of reserves discounted at 10 or 15% and add any other assets the company has (at cost) and deduct all debts.  For PWT here is the results.  Please keep in mind that the reserve data is stale, they have made two asset divestments this year ($355 million in Q4 and $175 million early this year).  I made some quick and dirty assumptions to account for this, and I corrected the balance sheet.  The reserve report is based on $90 WTI near term pricing and I made no corrections for the drop in oil prices.  You can add your own haircut to the numbers below.

All number in Canadian $, PDP = Proven developed producing, 1P = Proven reserves, 10 or 15 = discount rate, BT = Before tax.

Current Share price = $3.33/Share

PDP10BT - $3.48/share
PDP15BT - $1.61/share

1P10BT - $6.14/share
1P15BT - $3.31/share

So if oil was still selling for $90 or if you knew it would go back to that level next year, Penn west is a solid investment and meets my hurdle of 15%.  If you believe oil is going to stay at the $70 level, you will need to cut these numbers appropriately, and significantly.  Most of the value in a NPV calculation is the near term cash flows, as you already know. 

If these numbers interested me, which they don't, I would then have to look at the CF need to fund the capex and debt obligations.  The reserve report tells you the capital require to convert proven undeveloped reserves (PUDs) into PDP.  As you can see above, quite a bit of the 1P value is PUDs, not PDP. 

You're likely over all my rambling but to add further insult to injury, Penn west has the follow capex assumptions baked into their reserve report, see page A3-8.

Forecast Prices and Costs
 
Year
 Proved Reserves
(MM$)
 Proved Plus Probable Reserves (MM$)
 
2014
1P -  704
2P - 840
 
2015
1P - 973
2P - 1,533
 
2016
1P - 419
2P - 726
 
At the end of Q3 they had spent $485 million in capex.  Q4 will have to be curtailed due to the drop in oil prices and reduced CF.  There is no way in China they will be spending a billion dollars to develop their proven reserves, let alone the over $1.5 billion needed for the 2P reserves next year. 

And don't get me started on the dividend.  Why do these crony companies pay a dividend when they don't earn a profit?  It is purely to fool private investors who will pay for yield.  To me it is almost a legal Ponzi scheme where they constantly raise more equity to pay off the prior shareholders.  Take Crescent Point, CPG, they have made no money in the past 10 years but have effectively used their over priced equity to raise more of it or use it to buy other companies. 

One last word of caution.  Be wary of the NAV numbers touted by analysts.  If you read the fine print it is often based on a huge number of assumptions the analysts have added.  They also then blend it with a CF multiple, which they feel is accurate, and reach their target price.  All nonsense.  Also throw out all company presentations, all nonsense.  Also when you hear people say the company can drill 100% ROR wells, ask them why don't you see all these nonsense ROR's coming out the back end of the company, in the reported financial statements?  Full cycle and full cost accounting have a way of bringing these projections back to reality.

Awesome post Kevin, thank you for providing knowledgeable counterpoint. I have a general question in relation to your assertion that tangible asset and book value doesn't matter. This is not the first time I've heard this and every time I've heard it, it is from someone more knowledgable than I, so I am going to assume it is correct but I want to understand why.

The only other time I've ever bought a crappy small oil and gas e+p yield product was in 2009 I bought BBEP at 0.3X book because it was at 0.3X book, had lots of hedges, and seth klarman owned it. It was an upstream MLP that slashed its divvy. It was the second stock I ever bought; it was the summer after my sophomore year and I thought i was really smart. I made out on that, but maybe I was lucky or right for the wrong reasons.

Now back to my question. Here is my logic. I am an ignorant non-specialist operating with no analytical advantage. How can I hazard a guess as to what PWE may be worth? My first answer would be to start with the balance sheet. See what management paid to buy and develop these assets. the market is pricing these assets at 50 cents on the dollar.

I then can ask myself, knowing that former management was terrible and probably overpaid for everything, is that discount big enough? maybe it isn't, maybe it is. While a specialist may know better than I whether those assets are worth 15 cents on the dollar or 85 cents or 150 cents, doesn't the ultimate value of the company have some relation to what was paid for them? Isn't what was most recently paid  (which is balance sheet value) the starting point for analysis of assets?

My logic for taking a small (so far) gamble on this is "well shit they can sell some assets for 1/2 of what they paid and pay down debt and this will reprice from distress".

Am I just totally clueless?
Title: Re: PWE - Penn West Petroleum
Post by: Fat Pitch on December 07, 2014, 09:34:47 AM
I'd hazard a guess that most people here don't know much about oil and gas reserves. Heck I read the book Oil 101 which is the bible on the oil and gas complex and after reading it I realized I don't want to be messing with small O&G companies. While oil itself is fungible, the oil reserves differ materially from one to another.

Simply applying a margin of safety on some company's reserves isn't going to cut it. Reserve pressure, how porous the rocks are, water line, etc makes for too many variables. Take a look at the oil trusts, notice how the PV-10 values changed so drastically over a 1-3yr time period even though people were expecting production for 20yrs+ !
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 09:52:12 AM
also kevin, just to really illustrate my ignorance here, I'll ask an incredibly dumb question. Do you add the PDP to 1P to get what you would pay? I've seen others do this but I'm not sure that's what you are saying.

You are saying the value of the company at $90 oil is:

PDP10BT+1P10BT  = $9.52 per canadian share using a discount rate of 10%
PDP15BT +1P15BT = $4.92 per canadian share using a discount rate of 15%

You are saying :
a) you require a 15% ROR
b)oil has collapsed so the 15% discount rate value is much lower now
c) the decline in equity value is non-linear because of operating and financial leverage, so it's probably much lower, perhaps to the point of insolvency lower.

Am I interpreting what you said correctly? Apologies for all my pesky questions on this thread. Trying to learn.

EDIT: I reread your post and realize that you don't add them, so the values are $6.14 and $3.31, not $9.52 and $4.92. Ignorance successfully illustrated.
Title: Re: PWE - Penn West Petroleum
Post by: Hielko on December 07, 2014, 10:38:14 AM
Now back to my question. Here is my logic. I am an ignorant non-specialist operating with no analytical advantage. How can I hazard a guess as to what PWE may be worth? My first answer would be to start with the balance sheet. See what management paid to buy and develop these assets. the market is pricing these assets at 50 cents on the dollar.
I'm not an expert (not even close) in this field, but I think the major problem is that values can change drastically when oil prices drop. An asset could be worth $100 million at $100 oil, but zero at $80 oil (of course some optionality value remains). You could have massive leverage to the oil price, so looking at past transactions is only useful in a stable environment.
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on December 07, 2014, 10:41:00 AM
I think it is a waste of time to try and value the stock here accurately. You will likely be wrong anyway. The way I see it, you buy the 3$ 2017 puts, or the 2.5$ (any opinions?).

Then you spread it equally, so let's say 10k$ on the puts (2.5$ 2017), and 10k$ on the common?

if they pay out 200m$ over the next 2 years, then you get about 40% your money back from the puts, so you get 4k$ there. And about 1400$ from stock. So 5500$. So then stock either needs to trade 45% higher then now, Or trade lower then 1.5$. So you lose if stock trades between 1.5$-4.5$. Anything above and beyond is profit.

I think 200m$ is probably lowballing it here? Assumes a low oil price for 2 years, which seems unlikely.

If it is more like 400m$ in dividends over 2 years. You get 8k$ + 3k$ = 11k$. So then you lose if stock trades between about ~2-2.7$ .

So given that they paid close to 800m$ in dividends over the last 2 years, how likely is it that their oil wells run dry very soon, or they run out of cash flow? Who cares really where they are 5 years from now. If the stock crashes to zero after paying like 4-500m$ in dividends over the next 2 years, we still win.


To me the only downside case in this way of playing it, is if they cut dividend very soon, and it turns out a lot of their assets are kind of mediocre, and the price stays roughly at these levels. For that to happen, you need oil prices to stay depressed for about 2 years? Given how the options are priced, it seems the market thinks this is quite likely to happen? Did I make any mistakes in my calculation?
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 10:47:05 AM
Now back to my question. Here is my logic. I am an ignorant non-specialist operating with no analytical advantage. How can I hazard a guess as to what PWE may be worth? My first answer would be to start with the balance sheet. See what management paid to buy and develop these assets. the market is pricing these assets at 50 cents on the dollar.
I'm not an expert (not even close) in this field, but I think the major problem is that values can change drastically when oil prices drop. An asset could be worth $100 million at $100 oil, but zero at $80 oil (of course some optionality value remains). You could have massive leverage to the oil price, so looking at past transactions is only useful in a stable environment.

agree, but then the bonds are woefully mispriced! (assuming they actually are where bloomberg says they are)

if the asset value is so binary, then the bonds should compensate one for that risk and be priced well below par. we've got $8B ish of tangible assets and $2B of debt and a $1.5B market cap. the debt creates the assets at 25 cents on the dollar while the equity is 25-50 cents on the dollar. the bond holders are selling a put on the bottom 25 cents of asset value to clip low coupon with no upside, whereas the equity is short a put spread from 45-25 cents on the dollar, but gets all the upside.

once the divvy's cut and the equity collapses further (presuming this happens), then the leverage in the common and potential upside will be even greater, and those bond holders will be in an even more equity like un-cushioned downside risk position with zero upside to boot.

I would love to short those bonds or pay on CDS (there is no CDS contract, at least in the US, already looked into it).
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 07, 2014, 11:20:11 AM
Below is part of an email between Joel S and I.  I asked if it would be worth it to post these ideas and perhaps ignite a firestorm.  Anyways... here goes. 

I generally avoid oil and gas unless I am absolutely sure I am buying the low cost producer.  Never ever forget that when you buy oil and gas you are essentially buying the underlying commodity.  I have no way of telling where oil will go today, or tomorrow, so that is why I typically shy away from commodities.  I only buy if I see a huge margin of safety. 
 
I have industry experience, and I understand the business and valuations.  What most people don't understand is how lower oil prices influences so many factors.  It is not just your near term cash flow.  Reserves will be cut, bankers will be worried, asset write downs will occur in Q4, debt covenants may be broken, and bank lines will be curtailed.  Then add in tax loss selling and the oil sector is in for some pain over the next few months. 
 
I'll take a look at the names you mentioned.  I hope you can see from the MEG graph that the relationship between WTI and asset value per share is very non linear.  Many on COBF believe you can just can apply a discount to account for the falling oil prices. 

As for Penn West, here are my thoughts.  First, balance sheet and book values are useless in valuing an O&G firm, I see some making that mistake.  I value using the before tax net present value of reserves discounted at 10 or 15% and add any other assets the company has (at cost) and deduct all debts.  For PWT here is the results.  Please keep in mind that the reserve data is stale, they have made two asset divestments this year ($355 million in Q4 and $175 million early this year).  I made some quick and dirty assumptions to account for this, and I corrected the balance sheet.  The reserve report is based on $90 WTI near term pricing and I made no corrections for the drop in oil prices.  You can add your own haircut to the numbers below.

All number in Canadian $, PDP = Proven developed producing, 1P = Proven reserves, 10 or 15 = discount rate, BT = Before tax.

Current Share price = $3.33/Share

PDP10BT - $3.48/share
PDP15BT - $1.61/share

1P10BT - $6.14/share
1P15BT - $3.31/share

So if oil was still selling for $90 or if you knew it would go back to that level next year, Penn west is a solid investment and meets my hurdle of 15%.  If you believe oil is going to stay at the $70 level, you will need to cut these numbers appropriately, and significantly.  Most of the value in a NPV calculation is the near term cash flows, as you already know. 

If these numbers interested me, which they don't, I would then have to look at the CF need to fund the capex and debt obligations.  The reserve report tells you the capital require to convert proven undeveloped reserves (PUDs) into PDP.  As you can see above, quite a bit of the 1P value is PUDs, not PDP. 

You're likely over all my rambling but to add further insult to injury, Penn west has the follow capex assumptions baked into their reserve report, see page A3-8.

Forecast Prices and Costs
 
Year
 Proved Reserves
(MM$)
 Proved Plus Probable Reserves (MM$)
 
2014
1P -  704
2P - 840
 
2015
1P - 973
2P - 1,533
 
2016
1P - 419
2P - 726
 
At the end of Q3 they had spent $485 million in capex.  Q4 will have to be curtailed due to the drop in oil prices and reduced CF.  There is no way in China they will be spending a billion dollars to develop their proven reserves, let alone the over $1.5 billion needed for the 2P reserves next year. 

And don't get me started on the dividend.  Why do these crony companies pay a dividend when they don't earn a profit?  It is purely to fool private investors who will pay for yield.  To me it is almost a legal Ponzi scheme where they constantly raise more equity to pay off the prior shareholders.  Take Crescent Point, CPG, they have made no money in the past 10 years but have effectively used their over priced equity to raise more of it or use it to buy other companies. 

One last word of caution.  Be wary of the NAV numbers touted by analysts.  If you read the fine print it is often based on a huge number of assumptions the analysts have added.  They also then blend it with a CF multiple, which they feel is accurate, and reach their target price.  All nonsense.  Also throw out all company presentations, all nonsense.  Also when you hear people say the company can drill 100% ROR wells, ask them why don't you see all these nonsense ROR's coming out the back end of the company, in the reported financial statements?  Full cycle and full cost accounting have a way of bringing these projections back to reality.

doesn't pwt own a lot of land that does not fall into these two categories, which has a lot of potential to have oil and gas on it?
Title: Re: PWE - Penn West Petroleum
Post by: moustachio on December 07, 2014, 11:27:32 AM
I think 200m$ is probably lowballing it here? Assumes a low oil price for 2 years, which seems unlikely.

I don't think a low oil price for the next two years is very unlikely. US shale oil drillers will cut back activity at low price levels, but if prices start getting higher again they will quickly increase drilling activity. I think this could put a cap on oil prices for years to come. Isn't this why SA decided to not cut? If they cut they give up market share, but at high prices US drillers increase capacity quickly and we are back to low prices or OPEC having to cut production further. No one has a crystal ball, but I wouldn't be surprised if the natural balance leaves us in the 70-80 range. That could easily change with OPEC or OPEC plus non-OPEC production cuts, global political risk, etc. However, in the end I wouldn't make any big investment that requires 80 dollar or higher oil.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 12:19:58 PM
There are hundreds, if not more, oil and gas stocks that have been decimated.  Why is PWE particularly compelling versus some other hard hit securities?  Aside from the fact it has lost almost all of its value.

I have never been much of a believer in tax loss selling affecting the share price in a big way.  Maybe it contributes to some of the decline but I don't think you can blame most of it on it.  In fact I would be nervous taking a tax loss in PWE here.  If it is as cheap as everyone thinks, you run the risk of a massive rally in less than 30 days which screws up any tax savings you are trying to achieve.

Picasso, there are 38 stocks down 50% or more YTD that fit the following criteria: US+Canada, Oil and Gas (including services), market cap $300MM+.

Removing the market cap screen there are 398.  LOL. But I'm not sure how meaningful that is because it's picking up a lot of stuff that would just never be under consideration (namely penny stocks w/ no revenue, assets, or anything)
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on December 07, 2014, 01:34:10 PM
The reason why book value and tangible book is useless is because historical cost tells you nothing. 

If you drill a well for a million dollars and that well will only produce $250k in revenue at strip pricing, it doesn't matter what your historical cost is.  The NPV of the well determines what the value is.  The same can be said of land.  The price you pay for land means nothing, unless you can economically produce something of value. 

Awesome post Kevin, thank you for providing knowledgeable counterpoint. I have a general question in relation to your assertion that tangible asset and book value doesn't matter. This is not the first time I've heard this and every time I've heard it, it is from someone more knowledgable than I, so I am going to assume it is correct but I want to understand why.

The only other time I've ever bought a crappy small oil and gas e+p yield product was in 2009 I bought BBEP at 0.3X book because it was at 0.3X book, had lots of hedges, and seth klarman owned it. It was an upstream MLP that slashed its divvy. It was the second stock I ever bought; it was the summer after my sophomore year and I thought i was really smart. I made out on that, but maybe I was lucky or right for the wrong reasons.

Now back to my question. Here is my logic. I am an ignorant non-specialist operating with no analytical advantage. How can I hazard a guess as to what PWE may be worth? My first answer would be to start with the balance sheet. See what management paid to buy and develop these assets. the market is pricing these assets at 50 cents on the dollar.

I then can ask myself, knowing that former management was terrible and probably overpaid for everything, is that discount big enough? maybe it isn't, maybe it is. While a specialist may know better than I whether those assets are worth 15 cents on the dollar or 85 cents or 150 cents, doesn't the ultimate value of the company have some relation to what was paid for them? Isn't what was most recently paid  (which is balance sheet value) the starting point for analysis of assets?

My logic for taking a small (so far) gamble on this is "well shit they can sell some assets for 1/2 of what they paid and pay down debt and this will reprice from distress".

Am I just totally clueless?
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on December 07, 2014, 01:39:12 PM
Your exactly right.  It isn't linear down to $0 WTI.  Costs have to be paid from revenue.  At some point the result is ZERO.

Now back to my question. Here is my logic. I am an ignorant non-specialist operating with no analytical advantage. How can I hazard a guess as to what PWE may be worth? My first answer would be to start with the balance sheet. See what management paid to buy and develop these assets. the market is pricing these assets at 50 cents on the dollar.
I'm not an expert (not even close) in this field, but I think the major problem is that values can change drastically when oil prices drop. An asset could be worth $100 million at $100 oil, but zero at $80 oil (of course some optionality value remains). You could have massive leverage to the oil price, so looking at past transactions is only useful in a stable environment.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 07, 2014, 01:39:50 PM
Re O&G Valuation: Investors have to recognize that these things value in a non-linear fashion, not the linear valuation approach of just about all securities valuation methodology. There are two main approaches; use options in a straddle to exploit the volatility, or let supply/demand force the price down to either BK or something stable.

PWE is just one of many o/g firms. There is little harm in waiting a few months to see what happens to them. If todays price drops 40%, your same $ investment will get you 2/3 more shares. If they actually go under, you will have saved yourself a world of pain. Our preference is shares over options, but we're not afraid to use them, & O/G is in our circle of competency.

SD
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 07, 2014, 01:50:44 PM
Like you say, oil could stay down and this is a zero.  I got interested in the sector after reading the recent interview of a man who has seen a lot of these cycles -- T. Boone Pickens.  Explains that $100 oil in 12 months wouldn't surprise him.

I wanted an option that doesn't expire except upon bankruptcy, instead of putting a relatively larger amount into a safer name like XOM. 

PWE is kind of like that option.

Frees up liquidity this way.

I've already lost 1/3 of this money anyhow -- it is earmarked for paying BAC dividend taxes.  So only $2 per PWE share is really mine to keep.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 01:55:25 PM
Amen Eric, I think my takeaway from this discussion is that  Exxon is wife and PWE is a total prostitute. I went in thinking that but after reading kevin's and others commentary, I think she's even filthier than I first imagined. 

Appreciate all the input guys.
Title: Re: PWE - Penn West Petroleum
Post by: Picasso on December 07, 2014, 02:14:04 PM
Amen Eric, I think my takeaway from this discussion is that  Exxon is wife and PWE is a total prostitute. I went in thinking that but after reading kevin's and others commentary, I think she's even filthier than I first imagined. 

Appreciate all the input guys.

In other words, PWE is [insert your favorite board member]'s mother.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on December 07, 2014, 02:17:44 PM
Quote
Like you say, oil could stay down and this is a zero.  I got interested in the sector after reading the recent interview of a man who has seen a lot of these cycles -- T. Boone Pickens.  Explains that $100 oil in 12 months wouldn't surprise him.

The other one is Hamm who put his money where his mouth is and has removed all edges. He is one of the fathers of the current shale oil "revolution" and he recently explained his move a bit better: basically OPEC (including saudis) are all talks (their reserves are probably super inflated and their total prod has peaked a while ago..., along with the rest of conventional world production), oil prices will have to come back within next year...
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on December 07, 2014, 02:49:21 PM
Quote
Like you say, oil could stay down and this is a zero.  I got interested in the sector after reading the recent interview of a man who has seen a lot of these cycles -- T. Boone Pickens.  Explains that $100 oil in 12 months wouldn't surprise him.

The other one is Hamm who put his money where his mouth is and has removed all edges. He is one of the fathers of the current shale oil "revolution" and he recently explained his move a bit better: basically OPEC (including saudis) are all talks (their reserves are probably super inflated and their total prod has peaked a while ago..., along with the rest of conventional world production), oil prices will have to come back within next year...

Would you guys mind posting links to the interviews you read? TIA
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 07, 2014, 03:54:04 PM
I agree with Kevin... the sane way of valuing these assets is by doing your homework and trying to figure out their Net Present Value.

Unfortunately, these companies can easily fudge their own NPV calculations.  Go read the ATPG thread... LOL.  Their PV-10 values were not reliable to say the least.  Now the company's symbol is ATPAQ.

Personally, I'd be extremely skeptical about black boxes.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 04:10:32 PM
I agree with Kevin... the sane way of valuing these assets is by doing your homework and trying to figure out their Net Present Value.

Just curious, have you ever used said sane way of valuing assets and identified a long opportunity? I've never really seen you mention a resource company as a long and you appear to be quite knowledgeable and have read your mining textbooks and know a lot about lots of companies.

The correct answer may be there are none because you don't go looking for a wife in a whorehouse (to continue my misguided analogy) and that's kind of been my view given I've only ever bought 2 (3 if you count BP)

 But let's say someone was very bullish on oil or copper or whatever and hired you to buy five stocks to express their view. Which would you buy? Thanks.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 07, 2014, 04:37:12 PM
This is just like the old days on the BAC thread....

Yesterday, I thought about adding that we still needed some posts about:
1) I'm waiting for the next 30% decline before the bottom
2) It's a black box, how can you value it?

Well... deja vu. However, I felt better about BAC. And points 1&2 above are perhaps valid this time (in the case of BAC it was years after the crisis and books had been scrubbed)
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on December 07, 2014, 04:42:24 PM
This is just like the old days on the BAC thread....

Yesterday, I thought about adding that we still needed some posts about:
1) I'm waiting for the next 30% decline before the bottom
2) It's a black box, how can you value it?

Well... deja vu.

I'm new to the board. Did you guys go into BAC before or after Buffett got involved? There's nobody like that to follow into this -- not that I don't respect people on the board but following Buffett is kind of a no brainer
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 07, 2014, 05:04:11 PM
I agree with Kevin... the sane way of valuing these assets is by doing your homework and trying to figure out their Net Present Value.

Just curious, have you ever used said sane way of valuing assets and identified a long opportunity? I've never really seen you mention a resource company as a long and you appear to be quite knowledgeable and have read your mining textbooks and know a lot about lots of companies.

The correct answer may be there are none because you don't go looking for a wife in a whorehouse (to continue my misguided analogy) and that's kind of been my view given I've only ever bought 2 (3 if you count BP)

 But let's say someone was very bullish on oil or copper or whatever and hired you to buy five stocks to express their view. Which would you buy? Thanks.

Mining companies publish the NPV of their deposits.  For oil and gas companies, they publish the 'standardized measure' of their reserves.  That's basically a NPV calculation.

I haven't found it that useful because you don't know if the figure is honest.  Most of the time it isn't.

For Altius Minerals (there's a writeup on my blog) I did a very quick and dirty NPV calculation of what the Kami royalty was worth.  Eventually I realized that Kami was not economic due to falling iron ore prices.  Luckily for me, I had great timing when I sold.  I will never know if my calculations were sane unless the Kami mine gets built... so it's hard to say if my calculations were any good or not.

2- Honesty and talent are the two most important things.  In the long run, I think that they will overpower your entry/exit price.

On the long side, you figure out who has both.  Then buy their shares if the company is buying back shares because it thinks that they are undervalued.  Look at their past history to make sure that they do not buyback shares when they are high and stop buying when the share price is low.

On the short side, the industry is dominated by crooks and scumbags.  Of those people, you figure out the ones who are really incompetent at running a E&P or are actively stealing the from the company.  Look for massive headwinds that will eventually crush the company.  Valuation doesn't matter as much, but only short the overvalued companies.

If the company has a history of value destruction, then P/B is an ok proxy for valuation.  The critical assumption is that management is inflating book value.  (Book value can be understated if the company doesn't do shale and uses successful efforts.)  Looking at free cash flow is more important than P/B.

It's easier to figure out shorts than it is to go long.

3- The big picture is that underlying assumptions have a huge effect on the NPV of a company's reserves.  My NPV calculations are generally back-of-the-envelope.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 07, 2014, 05:13:25 PM
This is just like the old days on the BAC thread....

Yesterday, I thought about adding that we still needed some posts about:
1) I'm waiting for the next 30% decline before the bottom
2) It's a black box, how can you value it?

Well... deja vu.

I'm new to the board. Did you guys go into BAC before or after Buffett got involved? There's nobody like that to follow into this -- not that I don't respect people on the board but following Buffett is kind of a no brainer

That too...

Truth is, Buffett can't tell us how long oil will go down.  Nobody knows.

The upside to that is this is an asymmetrical payoff on an outcome that nobody can predict.  The cure to low prices is low prices though.  We just need the "how long" to be right, but nobody knows.  So you aren't competing against anyone with better information.
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 07, 2014, 05:16:05 PM
But let's say someone was very bullish on oil or copper or whatever and hired you to buy five stocks to express their view. Which would you buy? Thanks.

Buy the commodity futures and throw on tiny short positions of some of the inverse ETFs.  I'm serious!!

I find it very difficult to find good commodity longs.  The management teams are really, really bad.  Much worse than other industries.  Too many people behind resource stocks are trying to scam investors.

2- Sometimes you have to have the discipline to own nothing.  Buffett knows a lot about investment banks.  He worked at Solomon Brothers for a few months.

There have been long stretches of time where Buffett did not buy or sell anything relating to investment banks.

3- There aren't too many long opportunities in commodity stocks right now.  Things that I own or interest me right now:
KMI warrants
Kobex Capital
Ryan Gold.  Bad management (though better than their peers).  But... I'm attracted to cigar butts.  I don't own this at the moment.
KIROY / Kumba Iron ore (I never owned it)

That's it.  My list is very small and I would not load the boat on any of those stocks. 

Kobex and Ryan Gold aren't even commodity stocks.  I only like them because they are sitting on fat stacks of cash and trade at a discount.  KMI has low sensitivity to commodity prices.  It is sensitive to the demand for new infrastructure.
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 07, 2014, 06:06:55 PM
But let's say someone was very bullish on oil or copper or whatever and hired you to buy five stocks to express their view. Which would you buy? Thanks.

Buy the commodity futures and throw on tiny short positions of some of the inverse ETFs.  I'm serious!!

I find it very difficult to find good commodity longs.  The management teams are really, really bad.  Much worse than other industries.  Too many people behind resource stocks are trying to scam investors.

2- Sometimes you have to have the discipline to own nothing.  Buffett knows a lot about investment banks.  He worked at Solomon Brothers for a few months.

There have been long stretches of time where Buffett did not buy or sell anything relating to investment banks.

3- There aren't too many long opportunities in commodity stocks right now.  Things that I own or interest me right now:
KMI warrants
Kobex Capital
Ryan Gold.  Bad management (though better than their peers).  But... I'm attracted to cigar butts.  I don't own this at the moment.
KIROY / Kumba Iron ore (I never owned it)

That's it.  My list is very small and I would not load the boat on any of those stocks. 

Kobex and Ryan Gold aren't even commodity stocks.  I only like them because they are sitting on fat stacks of cash and trade at a discount.  KMI has low sensitivity to commodity prices.  It is sensitive to the demand for new infrastructure.

thanks, so in sum, very few are wife material.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 07, 2014, 07:34:28 PM
This is just like the old days on the BAC thread....

Yesterday, I thought about adding that we still needed some posts about:
1) I'm waiting for the next 30% decline before the bottom
2) It's a black box, how can you value it?

Well... deja vu.

I'm new to the board. Did you guys go into BAC before or after Buffett got involved? There's nobody like that to follow into this -- not that I don't respect people on the board but following Buffett is kind of a no brainer

That too...

Truth is, Buffett can't tell us how long oil will go down.  Nobody knows.

The upside to that is this is an asymmetrical payoff on an outcome that nobody can predict.  The cure to low prices is low prices though.  We just need the "how long" to be right, but nobody knows.  So you aren't competing against anyone with better information.

See the start date of this thread.  There was another before it for a few months.  I was in BAC a year before Buffett.  It was after Buffett, During TAX LOSS season that BAC reached $5.00 when I bit my tongue and really added. 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bac-wt-bank-of-america-warrants/

PennWest is a big company.  It is not going out of business.  They just sold 5-6% of production for 350 Million.  That gives me a 6 B plus value for the total existing production.  That Does not include reserves on the land they have drilling rights for, if any exist at all. If the non pumping land is worthless then the sale value of the company may be around 4 B after debt.  4 B = $8.00 per share minimum if it were sold.  Stock price is less than $4.00.  If someone offered $8.00 per share tomorrow for the whole company I would likely 3x/4x my money overnight. 

I dont disagree completely with Kevin42u's analysis.  The company was on an unsustainable path prior to the present managers.  It would have been in deep trouble, if the oil plunge had happened last year.  Right now the optics are clouded by the low oil price, the restatement, such as it was, and the turnaround efforts.  The debt level is high but the debt service is pretty cheap. 

My bet is that present management is better than most other companies out there.  Either Rick George, and Roberts are really stupid for investing 10'M between them in this company in the last 18 months, or they are really convinced they can out scam the scammers.  Or maybe they are better operators and legit. 

So my bet is now asymmetric, the way I like them. 

Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 07, 2014, 07:39:47 PM
This is just like the old days on the BAC thread....

Yesterday, I thought about adding that we still needed some posts about:
1) I'm waiting for the next 30% decline before the bottom
2) It's a black box, how can you value it?

Well... deja vu. However, I felt better about BAC. And points 1&2 above are perhaps valid this time (in the case of BAC it was years after the crisis and books had been scrubbed)

I too like Banking much better than commodities but It will be decades before we see another opportunity like that in banks. 
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 07, 2014, 08:13:06 PM
If you put in a lot of work, you could probably build a reasonable discounted cash flow model / figure out the NPV of the assets.

1- For some reason the filings on SEDAR talk about shut-in wells.  This is a bad sign if the company is shutting in wells that were only recently drilled.  This would suggest that the wells have low margins and have terrible economics.

The low margins really hurt when commodity prices decline.

2- Production dropped by roughly a quarter year-over-year, though that's partly due to asset dispositions.  With more work, you can figure out current decline rates.  If you research other wells in the area and look at production records (sometimes these are publicly accessible), you can make a guess about likely decline rates.  Because shale is new, it's hard to predict terminal decline rates.

3- Read through any technical/engineering reports.

4- If they have joint venture partners and assets with previous owners, it's well worth the effort to look into what other people think about the assets.

5- Their annual information form has NPV figures on page A3-4.

Proved reserves including non-producing and undeveloped reserves have a NPV of $5,895 at a 10% discount rate at forecasted commodity prices.  Of course that number may be inflated.  This is as of YE2013 and doesn't include asset sales, new wells brought online, etc.

5b- Their forecasted prices may be total bull****.  They do not resemble the forwards curves of the futures market.  See page A3-8.

I pretty much think that Sproule are a bunch of engineering whores.
Title: Re: PWE - Penn West Petroleum
Post by: peter1234 on December 07, 2014, 11:47:02 PM
Quote
Like you say, oil could stay down and this is a zero.  I got interested in the sector after reading the recent interview of a man who has seen a lot of these cycles -- T. Boone Pickens.  Explains that $100 oil in 12 months wouldn't surprise him.

The other one is Hamm who put his money where his mouth is and has removed all edges. He is one of the fathers of the current shale oil "revolution" and he recently explained his move a bit better: basically OPEC (including saudis) are all talks (their reserves are probably super inflated and their total prod has peaked a while ago..., along with the rest of conventional world production), oil prices will have to come back within next year...

Would you guys mind posting links to the interviews you read? TIA

Here is one with Pickens at our favorite show Mad Money with Cramer...
http://www.marketwatch.com/story/oil-tycoon-t-boone-pickens-predicts-return-to-100-a-barrel-2014-12-02

Can't find find the link to the interview, I believe it was on Dec 4. Pickens basically said he had seen so many of these cycles in 50 years and thinks oil will get back to $100 within 12-18 months.
Title: Re: PWE - Penn West Petroleum
Post by: meiroy on December 07, 2014, 11:59:57 PM
ItsAValueTrap,

Thank you for your thoughts. I have no idea where this company is going but always good to see some negative thoughts on companies.  IMHO commodities will keep going down for awhile if for the single reason they got to where they were due to China which is starting to adjust now, while various Commodities CEOs are talking BS how it will all get better. Low prices is indeed a cure for low prices just as high prices is a cure for high prices but it can take quite awhile. Gold will keep going down as well, I'll take a look when it goes again below 900...  Oil is somewhat different but it does seem to be partially secular not just because of shale but due to the solar/battery revolution which is already happening. Can anyone look at it and decide if the problem is temporary or permanent? If not it's speculation. Some big companies will definitely go down, being big won't help them. Could be an interesting hedge to auto companies. Pent up demand + Cheap Oil vs. Rising Oil.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 08, 2014, 10:19:01 AM
Who else here has been trying to buy the 2*2017 PWE Calls? 

Maybe we should alternate.  Is it legal to suggest that, or do it for that matter?
Title: Re: PWE - Penn West Petroleum
Post by: AtlCDore on December 08, 2014, 10:23:57 AM
Who else here has been trying to buy the 2*2017 PWE Calls? 

Maybe we should alternate.  Is it legal to suggest that, or do it for that matter?

I think if you were to operate as a group or multiple individuals and collectively own 5% then you would have to file.  In this instance, I would think it is legal.
Title: Re: PWE - Penn West Petroleum
Post by: vinod1 on December 08, 2014, 10:44:04 AM
Who else here has been trying to buy the 2*2017 PWE Calls? 

Maybe we should alternate.  Is it legal to suggest that, or do it for that matter?

Sorry Uccmal. I had a bid first at $0.85 then chased it all the way up to $1 until it got filled. I am not going to chase it anymore.

Vinod
Title: Re: PWE - Penn West Petroleum
Post by: fareastwarriors on December 08, 2014, 12:03:04 PM
Oil’s Slump Puts Canada Aquistions Streak on Ice


http://www.bloomberg.com/news/2014-12-08/oil-s-slump-puts-canada-aquistions-streak-on-ice.html (http://www.bloomberg.com/news/2014-12-08/oil-s-slump-puts-canada-aquistions-streak-on-ice.html)
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 08, 2014, 12:52:13 PM
Who else here has been trying to buy the 2*2017 PWE Calls? 

Maybe we should alternate.  Is it legal to suggest that, or do it for that matter?

Sorry Uccmal. I had a bid first at $0.85 then chased it all the way up to $1 until it got filled. I am not going to chase it anymore.

Vinod

Lol, thought there might be somebody on the board. 
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on December 09, 2014, 01:48:01 AM
Does anyone know the email address of Dave Roberts?  I would like to send him an email suggesting the following.  Stop the dividend next year and use the money saved from the dividend to buy back stock opportunistically.  This exercise should dramatically enhance shareholder value compared to simply paying out the dividend, as the share price now is extremely distressed, and the company's much improved operating performance and financial position offer a considerable margin of safety in doing so.  Anyone can think of an idea to push management to do this? 
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 09, 2014, 03:51:33 AM
Does anyone know the email address of Dave Roberts?  I would like to send him an email suggesting the following.  Stop the dividend next year and use the money saved from the dividend to buy back stock opportunistically.  This exercise should dramatically enhance shareholder value compared to simply paying out the dividend, as the share price now is extremely distressed, and the company's much improved operating performance and financial position offer a considerable margin of safety in doing so.  Anyone can think of an idea to push management to do this? 

I would think they are aware if the options.  Cutting the dividend to save money is okay, but buybacks for an oil company - absolutely not - total waste of money.  Its a small oil company.  They pay their people in stock.  Oil companies above all need the discipline a dividend enforces. 
Title: Re: PWE - Penn West Petroleum
Post by: yzstevie on December 09, 2014, 07:13:36 AM
Does anyone know the email address of Dave Roberts?  I would like to send him an email suggesting the following.  Stop the dividend next year and use the money saved from the dividend to buy back stock opportunistically.  This exercise should dramatically enhance shareholder value compared to simply paying out the dividend, as the share price now is extremely distressed, and the company's much improved operating performance and financial position offer a considerable margin of safety in doing so.  Anyone can think of an idea to push management to do this? 

I would think they are aware if the options.  Cutting the dividend to save money is okay, but buybacks for an oil company - absolutely not - total waste of money.  Its a small oil company.  They pay their people in stock.  Oil companies above all need the discipline a dividend enforces.

I agree that generally it's good to have the discipline to be paying stable dividends for oil & gas companies, but right now the situation is very special, and warrants an out-of-the-box response to actually take advantage of the situation to create shareholder value.  PWE's current management is disciplined enough to spend the company's cash prudently, and they now have the opportunity to purchase its stock at a massive discount to its intrinsic value.  I do believe the company has the financial and operating power to withstand a prolonged low oil price, and by using the quarterly dividends to buy back the stock at this level can create great value for shareholders and the company.  The company can simply reinstate the dividend when the stock trades at a fairer level. 
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on December 09, 2014, 07:28:38 AM
i don't think companies like pwt think "that way"...like how a value investor or p/e investor would look at their capital allocation decision and options. what they are doing now is decidedly old fashioned: rewarding widows and orphans, and Canadian pensioners with a return of their capital for "sticking with them" through hard times. like lots of investors they got more bullish as energy prices went up. they took off hedges maintained dividend, ended up with limited financial flexibility. they weren't prepared for approaching storms. the assets may be there. but often asset plays can be value traps.
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on December 09, 2014, 11:52:00 AM
PWE is probably trying to raise more capital so that insider salaries go up.  More capital also ensures that their jobs will last a longer time.

They don't want to cut the dividend because they think that the stock will tank.  In the past, PennWest was marketed towards dividend-chasing investors.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on December 09, 2014, 02:45:10 PM
Anyway, for those who fear a dividend cut and its impact on the stock price, then please take a look at Baytex today. While energy stocks rebounded, it is still surprising that this one went up.

Sometimes, the stock market it seems, really has these things priced in.

Cardboard

Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 10, 2014, 09:45:06 AM
priced in?...

btw, anyone alive here?

Anyway, for those who fear a dividend cut and its impact on the stock price, then please take a look at Baytex today. While energy stocks rebounded, it is still surprising that this one went up.

Sometimes, the stock market it seems, really has these things priced in.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on December 10, 2014, 01:45:50 PM
Well, I guess I should re-phrase that... Based on Baytex move yesterday, the dividend cut is priced in. However, the bankruptcy of Penn West is not fully priced in yet...

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 10, 2014, 02:28:19 PM
This is all oil price driven for now.

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

Title: Re: PWE - Penn West Petroleum
Post by: Viking on December 10, 2014, 02:35:25 PM
It looks like we are experiencing a full fledged panic in the oil market. Investors just want out of the sector. Now. The question is does this morph into something bigger. So much for the Christmas  stock market rally this year!
Title: Re: PWE - Penn West Petroleum
Post by: Eye4Valu on December 10, 2014, 02:50:50 PM
Think the oil patch makes for good end of year tax loss selling pressure?
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 10, 2014, 03:07:20 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: jawn619 on December 10, 2014, 04:15:52 PM
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...
Title: Re: PWE - Penn West Petroleum
Post by: undervalued on December 10, 2014, 04:23:40 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: EliG on December 10, 2014, 04:37:07 PM
The Very Bearish Case for Canadian Natural Gas (http://oilandgas-investments.com/2014/natural-gas/the-very-bearish-case-for-canadian-natural-gas/)

Quote
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 10, 2014, 05:19:06 PM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 10, 2014, 05:23:28 PM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 10, 2014, 05:24:07 PM
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%.
Title: Re: PWE - Penn West Petroleum
Post by: Hawks on December 10, 2014, 06:08:48 PM
0%  Will stick to the majors like XOM.
Title: Re: PWE - Penn West Petroleum
Post by: meiroy on December 10, 2014, 07:52:46 PM
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 :)
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 11, 2014, 05:46:37 PM
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
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 11, 2014, 06:08:19 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 11, 2014, 06:34:01 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: muscleman on December 11, 2014, 06:37:22 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 11, 2014, 06:42:09 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 11, 2014, 06:52:10 PM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 11, 2014, 06:57:45 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 11, 2014, 07:03:32 PM
Its a saying of Forrest Gump.  Your mom sounds like a character....
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 11, 2014, 07:09:30 PM
Its a saying of Forrest Gump.  Your mom sounds like a character....

Hmm...
Title: Re: PWE - Penn West Petroleum
Post by: gary17 on December 11, 2014, 07:20:52 PM
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.   


Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 11, 2014, 07:38:53 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: enoch01 on December 11, 2014, 08:30:40 PM
So this company is trading at what kind of normalized PE today?
Title: Re: PWE - Penn West Petroleum
Post by: redwood on December 12, 2014, 08:33:53 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 12, 2014, 09:12:34 AM
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

Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on December 12, 2014, 05:08:20 PM
Anyone had a glimpse of the PWT debt? Is it distressed?

So this company is trading at what kind of normalized PE today?
Title: Re: PWE - Penn West Petroleum
Post by: jawn619 on December 17, 2014, 05:53:58 AM
Reducing dividend to .03

http://money.cnn.com/news/newsfeeds/articles/prnewswire/CA92378.htm
Title: Re: PWE - Penn West Petroleum
Post by: redwood on December 17, 2014, 05:58:10 AM
Why are they getting rid of drip?
Title: Re: PWE - Penn West Petroleum
Post by: EliG on December 17, 2014, 06:10:40 AM
Why are they getting rid of drip?

Because they don't want to issue equity at distressed prices?
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on December 17, 2014, 06:43:07 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 17, 2014, 06:49:10 AM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 17, 2014, 06:56:09 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 17, 2014, 06:56:33 AM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 17, 2014, 06:57:40 AM
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,
Title: Re: PWE - Penn West Petroleum
Post by: EliG on December 17, 2014, 07:37:48 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 17, 2014, 09:26:19 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 17, 2014, 10:20:17 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on December 17, 2014, 11:50:21 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 17, 2014, 11:59:01 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Granitepost on December 19, 2014, 08:12:52 AM
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".   
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 19, 2014, 08:30:40 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 19, 2014, 08:37:11 AM
It is comical how these analysts work.

They make money when we trade in and out.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 20, 2014, 07:57:36 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: tyska on December 20, 2014, 08:25:25 AM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 20, 2014, 09:37:15 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 20, 2014, 09:54:05 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 20, 2014, 10:24:42 AM
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?
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on December 20, 2014, 01:20:38 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 20, 2014, 02:13:18 PM
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. 
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on December 20, 2014, 03:33:59 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on December 20, 2014, 05:40:29 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 20, 2014, 07:53:33 PM
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.

The hard part is to forecast how the oil price will go next year and then the next few years after that.

Most if not all analysts didn't see this coming, it's comical to see them pretending to know what is going on and yet come up with another predictions.

Remember how many analysts think BAC will be nationalized... where are those ppl now? Probably pumping BAC will double next few years.

I have seen range from 40-100, if oil trades below 50 for next few, many cos are over. OTOH, if it trades over $100 in next fews, many will go up a few times.

It's all speculation, don't kid yourself pretending you have an edge.

Title: Re: PWE - Penn West Petroleum
Post by: sys on December 20, 2014, 08:16:53 PM
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.

and $75 out to 2018.  i think most of us would agree that if their predicted environment occurs, there are better uses for our money than canadian e&ps.
Title: Re: PWE - Penn West Petroleum
Post by: sys on December 20, 2014, 08:19:04 PM
kilroy, thanks very much for linking those reports.  they are very interesting and useful.
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 20, 2014, 09:41:42 PM
All in to oil consumers if that is true.  8)

Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 21, 2014, 05:43:51 AM
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.

 I dont get your comment about confirmation bias. 

TD didn't account for the 355 million that covers the debt due this year, pure and simple.  The price guess is just that, a guess. 

Of course PWT can go bankrupt.   I am sure it wont be the first to go.  A few dozen others will go first.  At that point the pricing may have changed. 
Title: Re: PWE - Penn West Petroleum
Post by: 50centdollars on December 21, 2014, 05:49:55 AM
http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on December 21, 2014, 06:49:09 AM

I dont get your comment about confirmation bias. 


Let me quote Henry David Thoreau, "It's not what you look at that matters, it's what you see."

Quote

TD didn't account for the 355 million that covers the debt due this year, pure and simple.  The price guess is just that, a guess. 


No offence, but TD does take the $355 million into account.  If you look at the TD report Exhibit 7, CF Statement, CF from Net Acquisitions, it is $570 million.  If you read the Q3 financial statement it says lists property dispositions on the CF statement at $215 million. 

Look at that virginia, $570 million (TD YE estimate) - $215 (Q3 Actual) and you get... wait for it I have to get my calculator... $355 million. 

 
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on December 21, 2014, 07:07:42 AM
http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/

I think people were wrong because even though in long term, price will be dictated by supply and demand. In short to med term, there are just too many variables to consider. The good thing is you cannot recycle oil and replacing oil will take a long time.


If you want to be in oil for long term, find the low cost producers with excellent execution and balance sheet.

If you think oil will bounce back in a few months, buy the most leveraged with good assets and check back this time next year. As mentioned by many, it's much like options on oil price.

Or go short and go in oil consumers if you're bearish on oil.  Anyone actually did that earlier in the year?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on December 21, 2014, 08:12:37 AM

I dont get your comment about confirmation bias. 


Let me quote Henry David Thoreau, "It's not what you look at that matters, it's what you see."

Quote

TD didn't account for the 355 million that covers the debt due this year, pure and simple.  The price guess is just that, a guess. 


No offence, but TD does take the $355 million into account.  If you look at the TD report Exhibit 7, CF Statement, CF from Net Acquisitions, it is $570 million.  If you read the Q3 financial statement it says lists property dispositions on the CF statement at $215 million. 

Look at that virginia, $570 million (TD YE estimate) - $215 (Q3 Actual) and you get... wait for it I have to get my calculator... $355 million. 

 

Save your sarcasm for somewhere else.

TD has not counted the debt properly.  Try reading the actual company reports. 
Title: Re: PWE - Penn West Petroleum
Post by: cwericb on December 21, 2014, 09:15:08 AM
“Save your sarcasm for somewhere else.”  Agreed, this isn’t Stockhouse.

On the subject of analysts, I couldn't help but notice that a number of them downgraded FFH just a couple of days before share price popped by over $100 last month. Nice call.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on December 21, 2014, 11:13:36 AM
We need to recognize that the reports are marketing pieces; names are the same - but timeframes differ. $65 average selling price does not automatically mean $65 for every month of 2015, $55 for Q1 and $75 for Q4 produces the same $65 average.

3 months out a lower share price is a good possibility; not sure that $0.70/share is reasonable. But 50% off to $1.10-$1.25 does not seem at all unrealistic - if prices stay at $50-$60, there is a big write-down, & dividend & capex get cut again. The perfect storm is the expected Q4 write-off, not what has just occurred.

1 year out its pretty hard to see why the oil price would not be higher, & why PWE would not be at $4 or higher. Commodity pissing matches don't last forever, & a global accommodation will be reached; whether existing players like it or not. Nobody is going to want to go a rematch until the damage is healed up.

None of us has a crystal ball - hence prices of $0.70, or $4.00, are at best a WAG (Wide Assed Guess); don't shoot the messengers for attempting to put numbers around it. As the carnie barker says ... yous pays your moneys and takes your chances.
 
In Real Estate you make your real money when you buy, the actual sale is just a liquidity event. I would put it to you that we are seeing exactly the same thing here.

SD
Title: Re: PWE - Penn West Petroleum
Post by: undervalued on December 22, 2014, 02:03:38 PM
http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/

I think people were wrong because even though in long term, price will be dictated by supply and demand. In short to med term, there are just too many variables to consider. The good thing is you cannot recycle oil and replacing oil will take a long time.


If you want to be in oil for long term, find the low cost producers with excellent execution and balance sheet.

If you think oil will bounce back in a few months, buy the most leveraged with good assets and check back this time next year. As mentioned by many, it's much like options on oil price.

Or go short and go in oil consumers if you're bearish on oil.  Anyone actually did that earlier in the year?

Airlines will be doing great in this oil price. I am still holding my AAL which helps offset my holdings in SD and XCO.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on January 03, 2015, 09:38:56 AM
How long will PWE sustain in this oil price env ($50-) before it breaks some covenants?
Anyone seriously investigated?


http://fivethirtyeight.com/features/the-conventional-wisdom-on-oil-is-always-wrong/

I think people were wrong because even though in long term, price will be dictated by supply and demand. In short to med term, there are just too many variables to consider. The good thing is you cannot recycle oil and replacing oil will take a long time.


If you want to be in oil for long term, find the low cost producers with excellent execution and balance sheet.

If you think oil will bounce back in a few months, buy the most leveraged with good assets and check back this time next year. As mentioned by many, it's much like options on oil price.

Or go short and go in oil consumers if you're bearish on oil.  Anyone actually did that earlier in the year?

Airlines will be doing great in this oil price. I am still holding my AAL which helps offset my holdings in SD and XCO.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on January 03, 2015, 10:01:51 AM
How long will PWE sustain in this oil price env ($50-) before it breaks some covenants?
Anyone seriously investigated?

This cannot be done right now as we don't know what assets will be shut in at the lower price level. Most would expect that at $55, net of sale proceeds and additional write-downs to $55, they will be stretched. The cure is additional reduction of capex, staff cuts, & a debt covenant eliminating the remaining dividend in favour of additional interest coverage. The why everyone in Calgary is so nervous.

If you believe that oil will be back at $65 within 3 months, & there will be no additional year-end write-downs, PWE looks pretty good.

Otherwise, not so much. This is where you learn patience, & the true value of cash.

PWE is just an oil coy, & the opportunity is NOT unique.

SD
Title: Re: PWE - Penn West Petroleum
Post by: biaggio on January 03, 2015, 05:12:11 PM
From their last quarterly report

The main covenant in the senior notes is the senior debt to EBITDA threshold of 3:1. Is this right?

LTD= $2192million less $355=$1.837b

my ebitda calculation is ~$1.1B at $65 per barrel (in Canadian $)



Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on January 06, 2015, 07:43:25 PM
One of the most significant investing mistakes I ever made was investing in a company that was going through a rough patch. They lost 25% of their client base and finances were getting tight as you can imagine. My assessment was that they had recently sold a lot of equity in order to restructure their LT debt setup. They reduced their LT debt, didn't have anything due for 5 years and all the covenants were not in any danger. I assumed based on this that the management who I took to be smart guys would have the necessary leeway in order to downsize/find new clients and get the business back to profitability. Insiders were buying and some very smart Money managers were buying significant chunks. They even were still paying a dividend. Funny thing, they announced a dividend 3 weeks before they announced bankruptcy.

What I missed is not understanding just how significant their vendors were in providing them credit and how thin the ice was that they were on getting credit from the vendors in order to continue operations. The vendors cut off their credit and the company went belly up so fast. The interesting thing is that I don't think I could have seen this coming from looking at the financials because they don't tell what is needed to keep the business running. I studied that balance sheet and debt agreements so thoroughly and it turns out I was looking at the wrong thing.

Now let me relate this back to PWE.

I have been thinking about PWE in relation to oil prices (hard not to) and if oil prices go back up then everything is probably rosy. I have just been realizing how little I can tell about where oil is going to be in the future so I have been trying to get those thoughts, "if oil was at ____ then..."

If the price of oil is $10 or $10,000 per barrel there will still be oil companies profitably extracting it out of the ground. right now everyone is in a tizzy and companies are unprofitable because of the drastic change in the price of oil. But I am confident that once the price of oil stabilizes at what ever it will stabilize at, that there will be oil companies profitably removing it from the ground. I don't know where it will stabilize or when it will stabilize but I am sure it will stabilize.

back to my thinking on PWE, it's not about the price of oil but about does PWE have the necessary financial flexibility in order to give them enough time to restructure and re-size the business for the new price environment?

I see three threats to my investment.
1. bankruptcy
2. dilution through selling of more equity
3. management selling out at a low price (I really don't think much about this one because i can't anticipate it in any way)

My thinking is that while I don't know the time frame, if PWE is able to stick around long enough then it doesn't really matter what prices will be, PWE will be able to make a profit.

But what could cause Bankruptcy or the need for dilution ?

This is very naive thinking on my part and an oversimplification but if oil drops more or stays down then they can stop drilling and downsize the overhead of the business and just watch their BOE/D drop, and their revenue with it, shuting in production as it becomes unprofitable, pumping out of existing wells while they are profitable. I know that is an oversimplification. And that strategy just might work if they didn't have any debt but of course they do. So the question is how far can they go with that strategy while still maintaining the debt.

I know this has been rambling but I am trying to figure out what are the circumstances and probabilities of either bankruptcy or dilution.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on January 17, 2015, 07:38:50 PM
Today I look through the list of Canadian oil companies
PWE is definitely the most leveraged - it ranks at the high end but near the middle
But it's certainly one of the hardest hit picks
I don't have a reason - maybe b/c they have ZERO hedge in place? Not sure if this can justify...


One of the most significant investing mistakes I ever made was investing in a company that was going through a rough patch. They lost 25% of their client base and finances were getting tight as you can imagine. My assessment was that they had recently sold a lot of equity in order to restructure their LT debt setup. They reduced their LT debt, didn't have anything due for 5 years and all the covenants were not in any danger. I assumed based on this that the management who I took to be smart guys would have the necessary leeway in order to downsize/find new clients and get the business back to profitability. Insiders were buying and some very smart Money managers were buying significant chunks. They even were still paying a dividend. Funny thing, they announced a dividend 3 weeks before they announced bankruptcy.

What I missed is not understanding just how significant their vendors were in providing them credit and how thin the ice was that they were on getting credit from the vendors in order to continue operations. The vendors cut off their credit and the company went belly up so fast. The interesting thing is that I don't think I could have seen this coming from looking at the financials because they don't tell what is needed to keep the business running. I studied that balance sheet and debt agreements so thoroughly and it turns out I was looking at the wrong thing.

Now let me relate this back to PWE.

I have been thinking about PWE in relation to oil prices (hard not to) and if oil prices go back up then everything is probably rosy. I have just been realizing how little I can tell about where oil is going to be in the future so I have been trying to get those thoughts, "if oil was at ____ then..."

If the price of oil is $10 or $10,000 per barrel there will still be oil companies profitably extracting it out of the ground. right now everyone is in a tizzy and companies are unprofitable because of the drastic change in the price of oil. But I am confident that once the price of oil stabilizes at what ever it will stabilize at, that there will be oil companies profitably removing it from the ground. I don't know where it will stabilize or when it will stabilize but I am sure it will stabilize.

back to my thinking on PWE, it's not about the price of oil but about does PWE have the necessary financial flexibility in order to give them enough time to restructure and re-size the business for the new price environment?

I see three threats to my investment.
1. bankruptcy
2. dilution through selling of more equity
3. management selling out at a low price (I really don't think much about this one because i can't anticipate it in any way)

My thinking is that while I don't know the time frame, if PWE is able to stick around long enough then it doesn't really matter what prices will be, PWE will be able to make a profit.

But what could cause Bankruptcy or the need for dilution ?

This is very naive thinking on my part and an oversimplification but if oil drops more or stays down then they can stop drilling and downsize the overhead of the business and just watch their BOE/D drop, and their revenue with it, shuting in production as it becomes unprofitable, pumping out of existing wells while they are profitable. I know that is an oversimplification. And that strategy just might work if they didn't have any debt but of course they do. So the question is how far can they go with that strategy while still maintaining the debt.

I know this has been rambling but I am trying to figure out what are the circumstances and probabilities of either bankruptcy or dilution.
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on January 18, 2015, 06:47:24 AM
Debt to equity as of Q3 sat about in the middle (30% ish) according to that compilation.  That number could change if there are major write downs. (I would guess that is likely)

No hedging.  Canadian oil sands also didn't hedge - one of the bigger hits to market cap as well.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on January 18, 2015, 09:18:15 AM
We know their reserves were calculated @ 65/bbl, & that it is not realistic.
It is highly likely that reserves will be recalculated at $45-55/bbl, & the resultant write-downs will materially affect the SCFP.
It is hard to see how they will NOT breach covenants. So assume they do ... & the cost is further capex reduction & zero dividend.
It is a desirable player, so .... assume SCFP restructuring over BK, & dilution to avoid a take-out.

There is nothing wrong with waiting to see how their year-end numbers look. Only an idiot tries to pick up dimes ahead of a bull-dozer.

SD
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on January 18, 2015, 12:38:51 PM
Of coz,  just make sure  bull dozer is coming
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on February 01, 2015, 11:51:30 AM
David Roberts: Jan 22 Whistler Conf Q and A (no formal presentation)

Covenants are an issue for both the bonds and undrawn lines.  They are working on it.  Sooner the resolution the better (CFO wasn't there because he was working on it).  He thinks it makes more sense for the company to be a going concern noting they have 500m barrels of oil in the ground that has value.

$50 WTI doesn't work for anybody.  Thinks we'll see $55 for this year (i.e. a later bounce) and $70 then $80 in subsequent 2 years
Doesn't see this as 1986 but did not explain why
Eluded that he thinks this market is a deliberate test and doesn't think it was directed at US shale - stated it was only his opinion
They will be rational about capital with a revisit after the spring thaw  (this came up in a discussion re eliminating dividend - it's clear that's not where he would choose to go)

Company culture change: 1) It's about making money - not barrels of oil 2) Work in progress of shifting to bottom up decision/management as opposed to top down. They are now best in class in drilling for their 3 major fields

Comes across as rational, a true expert, comfortable, and very credible.  It was about the business and not him.
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on February 02, 2015, 06:08:08 PM
For those who don't know, Dave Roberts is the CEO of PennWest

He also noted that because of the environment, they are able to hire talent.

I don't know what the resolution to their covenants will be but it's hard to think there won't be some agreement other than BK
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on February 02, 2015, 06:21:44 PM
David Roberts: Jan 22 Whistler Conf Q and A (no formal presentation)

Covenants are an issue for both the bonds and undrawn lines.  They are working on it.  Sooner the resolution the better (CFO wasn't there because he was working on it).  He thinks it makes more sense for the company to be a going concern noting they have 500m barrels of oil in the ground that has value.

$50 WTI doesn't work for anybody.  Thinks we'll see $55 for this year (i.e. a later bounce) and $70 then $80 in subsequent 2 years
Doesn't see this as 1986 but did not explain why
Eluded that he thinks this market is a deliberate test and doesn't think it was directed at US shale - stated it was only his opinion
They will be rational about capital with a revisit after the spring thaw  (this came up in a discussion re eliminating dividend - it's clear that's not where he would choose to go)

Company culture change: 1) It's about making money - not barrels of oil 2) Work in progress of shifting to bottom up decision/management as opposed to top down. They are now best in class in drilling for their 3 major fields

Comes across as rational, a true expert, comfortable, and very credible.  It was about the business and not him.

I listened to it last week after he presented.  I too was impressed with his straightforward manner. 

I figure they will just ask their debt holders to adjust the covenants.  I am not sure the line of credit providers will be so forgiving, though.  I was looking at the situation with Connacher O&G today.  Their market cap is 18 million with 500 m shares.  They just issued 1 billion shares to their debt holders to kill some of their debt.  I dont think PWT will need to be that dramatic.  They are being fairly proactive about it, so we will see soon enough. 

Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on February 02, 2015, 08:36:38 PM
Good news is they report their credit syndicate as essentially undrawn as of early January.  Getting diluted out with warrants or share issuance is possible.....  And previous management issued a ton of shares so this probably hangs over PWE. With no particular insight - things don't seem that dire yet.
Title: Re: PWE - Penn West Petroleum
Post by: bbarberayr on February 06, 2015, 07:40:40 AM
Write up in the Globe and Mail from the Contra the Heard:

http://www.theglobeandmail.com/globe-investor/inside-the-market/when-budgeting-assumptions-go-awry-face-them-dead-on/article22757906/
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on February 25, 2015, 05:15:10 AM
Baytex revises debt covenants:

http://www.baytexenergy.com/files/pdf/news-releases/2015/2015-02-19%20_2015%20Budget%20Update_FINAL.pdf

Article on PWT/Baytex:


http://www.albertaoilmagazine.com/2015/02/is-penn-west-on-the-verge-of-a-major-restructuring/


Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on March 09, 2015, 07:46:14 AM
I received an update from LinkedIn for a job at Penn West today (engineering). So they have started to hire again at least in some areas.
Title: Re: PWE - Penn West Petroleum
Post by: tytthus on March 09, 2015, 10:30:35 AM
Quote
I received an update from LinkedIn for a job at Penn West today (engineering). So they have started to hire again at least in some areas.

Do specialize in shutting in wells?
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on March 09, 2015, 10:37:11 AM
Quote
I received an update from LinkedIn for a job at Penn West today (engineering). So they have started to hire again at least in some areas.

Do specialize in shutting in wells?
"Fiscal Engineer" ;-)

Regarding oil, just wait for the OPEC meeting.  Till then there is nothing to think about.
Title: Re: PWE - Penn West Petroleum
Post by: ItsAValueTrap on March 09, 2015, 11:32:14 AM
I received an update from LinkedIn for a job at Penn West today (engineering). So they have started to hire again at least in some areas.

Does it make sense for them to hire?  Given commodity prices, it's likely that fewer of their projects are economic.  So I'm not sure if it makes sense for them to be expanding their labour force???

Or are they looking for people with a specific skillset related to shutting in wells or something?
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on March 09, 2015, 11:38:58 AM
Quote
I received an update from LinkedIn for a job at Penn West today (engineering). So they have started to hire again at least in some areas.

Do specialize in shutting in wells?
"Fiscal Engineer" ;-)

Regarding oil, just wait for the OPEC meeting.  Till then there is nothing to think about.

The job title was pretty close to fiscal engineer, actually. It was for a job doing technical evaluation of projects and comparing their economics to the rest of the PWE portfolio. That's pretty much what I do right now at another producer (plus big-picture work on a specific project trying to improve its economics). I sort of think its like being a value investor in the oil patch (capital allocation work in an industry where its generally weak).

Anyway, I thought this might be of interest to the board, as it can be interpretted two ways.

1) They're confident they have this thing turned around and they're right.
2) They're confident they have this thing turned around and they're wrong.

Either way hiring provides a bit of insight into what management is thinking.
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on March 13, 2015, 02:36:40 PM
PennWest cut the dividend to a penny (from 3).  Dividend cash outlay will be about 20mm/yr
Debt covenants modified: increased in Senior debt to EBITDA and total debt to EBITDA to 5:1 (from 3:1 and 4:1) for a period of about 18 months.
Dropped their unused revolver from 1.7b to 1.2b
Funds flow will be about $1/share with assumptions of $65 (cdn)/barrel and exchange of 1.15  (down from 1.89)
Now say they are best in class in their core operating areas

Lost 1.7b last year - much due to write downs/non cash
They wrote down some reserves - but seem to still have a fair bit of optimism baked in e.g. oil estimates around 80 in 2016 and then going up to 90....

Changing the covenants (should be finalized in April) gives a fair bit of time for oil to stabilize or turn.  They are still asset rich even if the book value is overestimated for todays oil price.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on March 13, 2015, 03:25:03 PM
You might want to actually read the report - & not just scan it. Those Oil, NGL, and gas prices are quoted in $C - convert at todays FX rate & they are pretty much at todays market prices. They are also not going to have any trouble at all in paying down 650M over 2 years; without an asset sale. We were all handed a very big gift today; you just had to be willing to pick the dimes off the street  :)

SD
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on March 13, 2015, 04:03:36 PM
The exchange rate benefit is definitely there and yes brings the current $Cdn price close to the assumptions.  The table of future assumptions and what the reserves are calculated on - would be hard to characterize that as conservative. One might argue that assuming today's oil price for a year is not exactly conservative either (not knowable but we may not have bottomed)

Curious to understand how you think paying down 650mm over 2 years would be easy?  Capex plus the penny dividend is still over 100% of cash flow. Barrels produced is dropping

Title: Re: PWE - Penn West Petroleum
Post by: wellmont on March 13, 2015, 05:30:24 PM
The exchange rate benefit is definitely there and yes brings the current $Cdn price close to the assumptions.  The table of future assumptions and what the reserves are calculated on - would be hard to characterize that as conservative. One might argue that assuming today's oil price for a year is not exactly conservative either (not knowable but we may not have bottomed)

Curious to understand how you think paying down 650mm over 2 years would be easy?  Capex plus the penny dividend is still over 100% of cash flow. Barrels produced is dropping

there is a guy who follows this stock extremely closely---a bull. he says they need to sell hundreds of millions of assets and they need the oil price back over $60 within 3-4 months. otherwise he thinks they will have to sell the entire company. that would be a distressed sale. he is still really bullish based on the asset values. But that's the situation as he sees it.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on March 14, 2015, 08:58:46 PM
Not that lonq ago PWT was proposing to pay dividends at 0.14/quarter - roughly 250M/yr, AND their proposed capex was higher. We're pretty sure that at some point over the next 2 years we will see the same underlying conditions, for an extended period, that supported this REDUCED payout. They aren't selling bitumen; they are selling light crude & NGL's.

We're pretty sure they will not get sold either, simply because they would look for private placement money first. GS, GE, are both examples that we're all very familiar with.

We're also pretty sure there will be a asset sale, but it will not be at fire-sale prices. If it happens, great - but it's not the end of the world if it gets delayed either.

As already pointed out - where is the risk here? We would also highlight that you're getting a 2% cash yield to take it.

SD

Title: Re: PWE - Penn West Petroleum
Post by: StevieV on March 15, 2015, 06:41:10 AM
Does anyone know where I can find a transcript of the conference call (not an audio replay)?  Usually they are posted on Seeking Alpha within a day or two, but it doesn't seem to be there.  Also can't find it on the street.com.

Thanks in advance.

Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on March 15, 2015, 10:14:46 AM
Nawar and a few others have started to highlight, the massive discrepancy in valuation between Penn West and WhiteCap, Crescent Point, Raging River and others.

Basically, if Penn West was sold in pieces: Cardium, Viking, Slave Point, Spearfish to producers who are adjacent to them in these areas, they would likely obtain enough proceeds to repay their debt which is all senior notes at fixed rates or at an average of 6.0% and deliver a multiple bagger to shareholders. Of course, assets such as the Duvernay, Peace River and royalties would still be there. Recent transactions of that nature or consolidating an area if you will, have received very acceptable metrics despite the severe plunge in oil prices.

IMO, transactions of that nature have and would be easily accepted by investors, analysts and bankers for the acquiring producers which are not very large cap oil producers: pay a much better price than a few months ago and realize economy of scale in that area.

The question is: would the company and management be willing to entertain such proposals?

While it is not part of the current plan since the Cardium, Viking and Slave Point have been identified as core areas and Penn West has already best in class results in these areas (which again points to the non-sense in its valuation), it would not be a problem for a large entity acquiring the entire company.

At $5 a share, it would be just over $4.6 billion CAD in Enterprise Value or a very manageable sum for many private equity firms, hedge funds and large O&G companies. Such premium would be enough to convince worried shareholders to tender or just like for the Talisman Energy acquisition.

Being a strong entity or not forced into a corner to negotiate, they could then start the piece meal process and easily net within 12 months, $2 billion from their investment even at current metrics for transactions. If they are a bit more patient $4 or $5 billion is certainly not out of the question. These are very attractive returns for anybody and especially firms that are looking to deploy billions in capital in what is an over-heated market for fixed income and other yielding assets.

Moreover, an asset that has been overlooked at PWT are the tax pools which stand at $4.7 billion at year end. That alone is $1.7 billion more than the current entire Enterprise Value of $3.0 billion.

With the added flexibility from their new debt covenants and the Spearfish and royalties already being for sale, they could very well survive this downturn and end up on the other side in a very good shape with all their crown jewels. The market does not seem to believe in any of these scenarios and if we are to put any weight to the very low level of analysts participation in the last conference call, confidence is at an all time low.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on March 15, 2015, 12:35:13 PM
One thing I forgot to mention. And if you are that strong entity buying out Penn West, you spend a few hundred millions hedging against the industry: oil price, puts on companies involved, energy indexes, credit default swaps if available. And since these are all trading at lower volatility than Penn West, it is cheap insurance.

It is almost a guaranteed way to make money.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on March 15, 2015, 12:55:54 PM
I have followed nawar for a while now. his bullishness on pwe went down after the last report. his latest idea is that pwe has a few months to "make things happen". and they need the price of oil back up to around $60. otherwise there will be a large forced sale of assets in Canada.

there is an obvious bid ask spread in what buyers are willing to pay and what sellers want for their assets. this was stated clearly late last week by ceo of raging river, who is in a position to buy assets. there are three or four distressed sellers in canada (that I know of) with good assets right now. no deals are getting done. the buyers are not going to pay big premiums in this environment. this is an environment for vultures. this is why it's a waiting game right now. sellers waiting for prices to recover. buyers waiting for them not to.

regards
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on March 15, 2015, 01:57:12 PM
Post has been removed. I truly apologize for misleading the casual reader.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on March 15, 2015, 02:22:09 PM
"no deals are getting done."

This is not true.

- TORC bought Saskatchewan assets on Feb 5
- Bonterra bought Cardium assets on Feb 19
- Tourmaline bought assets from Perpetual this week.

What is not getting done are large deals such as what happened with the acquisition of Talisman. Hence why I mentioned the importance for mid to large cap players in Canada to make deals that allow them to consolidate their core areas. This is the only way for Bay Street to give a thumbs up to such deals.

Until majors or private equity are willing to entertain full take-overs of companies that are suffering, not from the quality or the value of their assets, but from a capital structure problem, then we won't see big deals. My guess is that this is coming and it may come in the form of unsolicited offers and taken directly to shareholders.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: kilroy04 on March 15, 2015, 04:54:33 PM
Sculpin - seemed like you were posting the link to me.  Keep contributing.....
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on March 15, 2015, 05:28:19 PM
Sculpin - seemed like you were posting the link to me.  Keep contributing.....
+1

At first I thought you wrote that, but then I clicked on the link and figured out it was the guy you mentioned. Not really a big deal IMHO
Title: Re: PWE - Penn West Petroleum
Post by: Vizi1 on March 15, 2015, 07:03:12 PM
As already pointed out - where is the risk here? We would also highlight that you're getting a 2% cash yield to take it.

Reading the last few posts since the release last week, I find that baked into everyone's view of the future is that oil is going up.  PWT has bought itself some time, but if oil falls then isn't that where the risk is.

I speak as an investor who bought in at $5+ and never appreciating the depth of the oil collapse.

I still watch it, but I think this thread ignores the possibility of $30 or $40 dollar oil or at least oil not moving from here for the next few quarters.
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on March 15, 2015, 07:59:48 PM
As already pointed out - where is the risk here? We would also highlight that you're getting a 2% cash yield to take it.

Reading the last few posts since the release last week, I find that baked into everyone's view of the future is that oil is going up.  PWT has bought itself some time, but if oil falls then isn't that where the risk is.

I speak as an investor who bought in at $5+ and never appreciating the depth of the oil collapse.

I still watch it, but I think this thread ignores the possibility of $30 or $40 dollar oil or at least oil not moving from here for the next few quarters.

What is sad is that I played the what if game in my head.

I said, what if oil companies in the USA keep drilling.  Then what happens to the oil supply.  But if the oil supply increase, what if the USA keeps drilling.

Even after tha exercise I didn't see this.  But I have to say that this was never a slam dunk.
Title: Re: PWE - Penn West Petroleum
Post by: fareastwarriors on March 16, 2015, 07:42:09 AM
Another sizable drop today... who's adding?
Title: Re: PWE - Penn West Petroleum
Post by: jawn619 on March 16, 2015, 07:57:47 AM
another sizable drop, who's re-evaluating their thesis and cursing that they ever bought into this?
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on March 16, 2015, 08:54:18 PM
another sizable drop, who's re-evaluating their thesis and cursing that they ever bought into this?

I'm not doing anything until I have time to look into PWE and a few others again.  I might DCA but in a bucket of oil companies kinda way.  SU is a new Buffett holding so that one is in my sights.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on March 17, 2015, 06:14:34 AM
"another sizable drop, who's re-evaluating their thesis and cursing that they ever bought into this?"

Every damn day!

Although, I recall the pain that I had in the past with many names that ended up being my greatest successes.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on March 23, 2015, 04:41:47 PM
FWIW I bought into this today. Seems like good value for the price. Hopefully it doesn't go to 0  ;)
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on April 14, 2015, 12:38:49 PM
Trading halted as PWE announces a sale of royalty interest for $321 Mil

http://finance.yahoo.com/news/penn-west-announces-321-million-192500063.html

I am not sure what kind of value they received for their assets in this sale. But it does go a significant way towards stabilizing their balance sheet.
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on April 14, 2015, 01:33:54 PM
The following is from a post on the Investor Village PWE board by Nawar. Seems like PWE has cut a pretty good deal on this sale of the royalty interests....

Penn West got an excellent price for those assets (probably due to a bidding content between Freehold and Prairie Sky). Based on the details included in the TD package, the royalty asset production was 742 barrels (0.8% of the company total production) meanwhile associated cash flow was below 2% of the company total cash flow, yet this deal alone has reduced Penn West total debt by 15%!.
 
I expect this deal to be the first step in a series of steps that will unlock Penn West value and align it with its peers in the market, thus potentially taking the shares to $6-$8 later in the hear.
 
Regards,
Nawar


http://www.investorvillage.com/smbd.asp?mb=4217&mn=9378&pt=msg&mid=14853119
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on April 14, 2015, 02:34:31 PM
Rad  8)
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on April 15, 2015, 06:26:32 AM
sculpin,

This forum needs a "like button"
Title: Re: PWE - Penn West Petroleum
Post by: Jurgis on April 15, 2015, 08:05:26 AM
sculpin,

This forum needs a "like button"

OT: I agree, this forum needs a non-Facebook-connected like button.

It seems that either nobody uses the Facebook-like-button that is there or it does not work or both.
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on April 15, 2015, 08:40:41 AM
The following is from a post on the Investor Village PWE board by Nawar. Seems like PWE has cut a pretty good deal on this sale of the royalty interests....

Penn West got an excellent price for those assets (probably due to a bidding content between Freehold and Prairie Sky). Based on the details included in the TD package, the royalty asset production was 742 barrels (0.8% of the company total production) meanwhile associated cash flow was below 2% of the company total cash flow, yet this deal alone has reduced Penn West total debt by 15%!.
 
I expect this deal to be the first step in a series of steps that will unlock Penn West value and align it with its peers in the market, thus potentially taking the shares to $6-$8 later in the hear.
 
Regards,
Nawar


http://www.investorvillage.com/smbd.asp?mb=4217&mn=9378&pt=msg&mid=14853119

this was his first cut at the deal. upon further analysis he discovered there were more parts to the deal that made it slightly less favorable to PWT.

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 15, 2015, 09:27:46 AM
You might want to keep in mind that for PWT to be free of the dividend covenant by Dec-31, they need the rest of the transactions to execute by June 30. It is highly likely that over the next 8 weeks or so- there are going to be at  least one or two more announcements.

In the meantime, may we all enjoy!

SD
Title: Re: PWE - Penn West Petroleum
Post by: jawn619 on April 15, 2015, 09:30:48 AM
Congrats everyone. I didn't stay in this because of what I thought was a very real chance of bankruptcy with the high debt load, but things are definitely looking up with the asset sale.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 20, 2015, 07:43:00 AM
I am still holding Leaps and a tiny bit of common: $1.50 and 2.00 Leaps which are all positive for a change. 

There has been interesting developments recently.  The crude price in Cdn. dollars is well above PWTs assumptions of 65 CDn.  The nat. gas price is still below their assumptions but not by much.  I am not exactly sure what this means - lets say its better than a kick in the teeth. 

There was insider buying in late March from Dave Roberts and a recently new director (the guy who runs Telluride Petroleum - I cant find info. on this company - private?). 

And of course the asset sale. 

I am wondering what they might take in a buy out.  I am thinking about $8.50.  The COB is going to want to get his money back and that is around his average purchase price. 
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on April 20, 2015, 07:56:01 AM
Estimates I have seen for a buyout have been estimated at between $6 - $8 CAD. So, $8.50 is on the high end, but I understand your logic.
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on April 20, 2015, 08:07:40 AM
I am wondering what they might take in a buy out.  I am thinking about $8.50.  The COB is going to want to get his money back and that is around his average purchase price.

Who do you think is a realistic buyer of PWE? I don't see any of the big US guys wanting their assets, and the only Canadian one I could see buying it would be CNQ (and Murray Edwards knows the assets). They would want a discount. Maybe someone international? I have to think with many of the big asian multinationals getting burned in the Canadian oilpatch recently that there will be less appetite for a deal there. I basically can't come up with a buyer for PWE at a reasonable price...
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 20, 2015, 12:32:34 PM
I am wondering what they might take in a buy out.  I am thinking about $8.50.  The COB is going to want to get his money back and that is around his average purchase price.

Who do you think is a realistic buyer of PWE? I don't see any of the big US guys wanting their assets, and the only Canadian one I could see buying it would be CNQ (and Murray Edwards knows the assets). They would want a discount. Maybe someone international? I have to think with many of the big asian multinationals getting burned in the Canadian oilpatch recently that there will be less appetite for a deal there. I basically can't come up with a buyer for PWE at a reasonable price...

Dont know.  All I know is that Rick George, the COB spent 8 million or so on shares at an average of 8.50 and he would be part of any negotiations.  Suncor?  ARX?  Lots,of people know the assets. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 20, 2015, 12:32:42 PM
We have a very different take ..

If you want it, you're paying the going rate producing boe. 100K is pretty standard; 115K was recently paid by Bonterra for the light, sweet, crude in their area. $18-25/share before you're done the pissing match.

Take a run at them for $8-$10, & they will just do a private placement for the 450M left to pay the bank - & start the clock ticking on higher dividends. You'll also have competition, because if the asset sales are not going well .. this is almost exactly what a good CFO would orchestrate  ;)

The Q1 numbers are most likely also a little better than most are expecting. Higher average selling prices, no amortization from the written-off assets, and the distinct possibility of another rabbit in the hat.

We also wouldn't put it past PWE doing some 2H consolidating, & using equity as currency  ;)

SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 21, 2015, 04:16:35 AM
We have a very different take ..

If you want it, you're paying the going rate producing boe. 100K is pretty standard; 115K was recently paid by Bonterra for the light, sweet, crude in their area. $18-25/share before you're done the pissing match.

Take a run at them for $8-$10, & they will just do a private placement for the 450M left to pay the bank - & start the clock ticking on higher dividends. You'll also have competition, because if the asset sales are not going well .. this is almost exactly what a good CFO would orchestrate  ;)

The Q1 numbers are most likely also a little better than most are expecting. Higher average selling prices, no amortization from the written-off assets, and the distinct possibility of another rabbit in the hat.

We also wouldn't put it past PWE doing some 2H consolidating, & using equity as currency  ;)

SD

Thats a very interesting perspective.  Based on what Bonterra paid PWT is worth what you say.  Thanks for the lesson in valuing oil resources.  I hadn't really looked at it that way before. 
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on April 21, 2015, 09:55:35 AM
We have a very different take ..

If you want it, you're paying the going rate producing boe. 100K is pretty standard; 115K was recently paid by Bonterra for the light, sweet, crude in their area. $18-25/share before you're done the pissing match.


100k per bbl/d was the right number in a higher oil price environment. 115k per bbl/d is the right number in a higher oil price environment with significant upside in the assets. It's also the right number if you can talk someone into overpaying.

I hate betting that someone else will overpay for something. It feels like investing in tech stocks in '07-'08 to me. This is worth X per eyeball because someone else just paid X per eyeball.

I haven't done too much work on PWE (so they could be worth that), but I think that style of analysis is speculative as opposed to value investing.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 21, 2015, 05:07:06 PM
"Bonterra" is actually Beaumont Energy; & they paid $115,200 boe, in Feb-2015, for a stake in one of PWE's main plays. Keep in mind that you can ONLY drill for oil, or buy the reserve of someone else - if you want light, sweet, crude its 115K - & its coming out of your drilling budget. AND this oil ... is already tied into the collection system, is producing, & getting sold - every day - generating CF from day 1.

Nobody is going to be getting much of a discount here.

SD
Title: Re: PWE - Penn West Petroleum
Post by: alertmeipp on April 21, 2015, 07:02:56 PM
SD,

You are assessment is overly optimistic. I am not saying PWE does not have some production that can sell for 100k, but it won't be majority.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 22, 2015, 04:00:46 AM
SD,

You are assessment is overly optimistic. I am not saying PWE does not have some production that can sell for 100k, but it won't be majority.


Well then.  Lets be really conservative in our assumptions and say PWTs average production is worth 60k x 95000 boe/day / 500M shares  ~ $11 per share. - P&P is free. 
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on April 22, 2015, 08:50:18 AM
SD,

You are assessment is overly optimistic. I am not saying PWE does not have some production that can sell for 100k, but it won't be majority.


Well then.  Lets be really conservative in our assumptions and say PWTs average production is worth 60k x 95000 boe/day / 500M shares  ~ $11 per share. - P&P is free.

You need the plant and equipment to produce the oil and earn the money from selling the oil. You shouldn't capitalize the earnings of a business, and then also count the value of the assets required to produce those earnings, since if you sell the assets the earnings go away. Unless of course I misunderstand what you are saying.

Anyway, I'm not trying to dump on this idea, just comment on some of the more aggressive assumptions that I don't think are warranted. I do think it's probably a positive EV idea, but I'm already over-exposed to Canadian oil and gas via my career/stock options.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 23, 2015, 10:28:16 AM
You might want to think again.

The purchase boe price is the price for EVERYTHING/proven reserve.

Buy a lease in a moose pasture, where you've got to find the oil, then connect into the collection system, & find pipeline space & a market - & you are quite correct - you would pay squat for it.

But buy a tied-in producing well, with its pipeline space & export contract, & you are going to be very happy to pay. And if you intend to consolidate high quality wells in the same field, you would also be willing to pay very well - as you are going to get economy of scale, and a barrier to entry against anyone else trying to enter the field. Then remind yourself that you don't have to sell or buy wells to consolidate - you could also simply swap wells from a similar quality field; or swap production via a derivative.

SD
 
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on April 24, 2015, 08:01:42 AM
You might want to think again.

The purchase boe price is the price for EVERYTHING/proven reserve.

Buy a lease in a moose pasture, where you've got to find the oil, then connect into the collection system, & find pipeline space & a market - & you are quite correct - you would pay squat for it.

But buy a tied-in producing well, with its pipeline space & export contract, & you are going to be very happy to pay. And if you intend to consolidate high quality wells in the same field, you would also be willing to pay very well - as you are going to get economy of scale, and a barrier to entry against anyone else trying to enter the field. Then remind yourself that you don't have to sell or buy wells to consolidate - you could also simply swap wells from a similar quality field; or swap production via a derivative.

SD

Oh for sure. I don't dispute that production is worth $X per flowing bbl. I think 115k is high, but that is what it is. Obviously it varies by the quality of the assets.

I was more referring to Uccmal's comment that P&P was free after you count the production. If he was referring to property and plant, then I would comment you need the property and plant to produce the oil, so once you've paid for the production at a high price you wouldn't pay for the property and plant separately.

If he was talking about proved and probable reserves, I have a similar comment. Once you've paid for the production, you've effectively paid for the reserves as well, since the production is depleting the reserves. There are a few exceptions to this (underdeveloped lands, etc), but it's generally true.
Title: Re: PWE - Penn West Petroleum
Post by: innerscorecard on April 27, 2015, 07:25:03 PM
I can't say that I agree very much with this writeup, but I thought I'd post it here:

http://www.beyondproxy.com/penn-west-petroleum-distressed-valuation-not-justified/

It's interesting that it appears not to have been edited for grammar.

Actually, in general I don't find the ideas posted on Beyond Proxy to be that good at all, now that I think about it.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 27, 2015, 08:44:47 PM
We would put it to you that after the earnings release , & proof that the house isn't burning, the equity & bond valuations are going to move back in sync - & in pretty short order. It will happen quicker if there is an accompanying asset sale, but one step at a time.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 28, 2015, 04:16:06 AM
You might want to think again.

The purchase boe price is the price for EVERYTHING/proven reserve.

Buy a lease in a moose pasture, where you've got to find the oil, then connect into the collection system, & find pipeline space & a market - & you are quite correct - you would pay squat for it.

But buy a tied-in producing well, with its pipeline space & export contract, & you are going to be very happy to pay. And if you intend to consolidate high quality wells in the same field, you would also be willing to pay very well - as you are going to get economy of scale, and a barrier to entry against anyone else trying to enter the field. Then remind yourself that you don't have to sell or buy wells to consolidate - you could also simply swap wells from a similar quality field; or swap production via a derivative.

SD

Oh for sure. I don't dispute that production is worth $X per flowing bbl. I think 115k is high, but that is what it is. Obviously it varies by the quality of the assets.

I was more referring to Uccmal's comment that P&P was free after you count the production. If he was referring to property and plant, then I would comment you need the property and plant to produce the oil, so once you've paid for the production at a high price you wouldn't pay for the property and plant separately.

If he was talking about proved and probable reserves, I have a similar comment. Once you've paid for the production, you've effectively paid for the reserves as well, since the production is depleting the reserves. There are a few exceptions to this (underdeveloped lands, etc), but it's generally true.

I meant proved and probable.  You have a partial point there.  In Pwts case there is alot of untapped reserve.  So perhaps the price/ barrel of production might be higher than usual based on that.  But I go pretty conservative whenever I calculate anything future based and I dont set targets.  If PWT recovers and reinstates its dividend, with a more manageable debt structure, I would likely keep some stock indefinitely. 
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 28, 2015, 04:50:28 AM
We would put it to you that after the earnings release , & proof that the house isn't burning, the equity & bond valuations are going to move back in sync - & in pretty short order. It will happen quicker if there is an accompanying asset sale, but one step at a time.

SD

I agree.  Once it is realized that PWT will survive this, there will be a big and rapid pop in tue stock price. 
Title: Re: PWE - Penn West Petroleum
Post by: original mungerville on April 28, 2015, 06:23:26 AM
Two questions:

What are the bonds trading like?

And do you think the re-appraisal starts with the earnings call on Thursday?

If the assets are worth $11 plus per share, the LEAPS and even the stock have a great risk-reward ratio here. 5 on the upside and 1 on the downside.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 28, 2015, 06:52:20 AM
Two questions:

What are the bonds trading like?

And do you think the re-appraisal starts with the earnings call on Thursday?

If the assets are worth $11 plus per share, the LEAPS and even the stock have a great risk-reward ratio here. 5 on the upside and 1 on the downside.

I dont know.  There is a reference to the bonds back in thread, around December, I think.  If someone could look them up on a Bloomberg it would be helpful.  They are not publicly listed so any trades are OTC. 
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on April 28, 2015, 06:55:20 AM
I looked into them, but only have the ability to get runs from US trading desks. They don't trade in US. I asked if someone had any contacts to Canadian sell side desks, but that didn't get anywhere.
Title: Re: PWE - Penn West Petroleum
Post by: original mungerville on April 28, 2015, 06:57:41 AM
Thanks guys. SD do you know?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 28, 2015, 06:58:06 AM
Pupil, you posted this in December:  (this is what I got when I googled PennWest Bonds).

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pwe-pennwest/145/?wap2
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on April 28, 2015, 07:08:53 AM
Assets are not worth anywhere near $11.  $/flowing boe is a grossly misleading valuation technique.

Two questions:

What are the bonds trading like?

And do you think the re-appraisal starts with the earnings call on Thursday?

If the assets are worth $11 plus per share, the LEAPS and even the stock have a great risk-reward ratio here. 5 on the upside and 1 on the downside.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on April 28, 2015, 07:45:50 AM
We would put it to you that after the earnings release , & proof that the house isn't burning, the equity & bond valuations are going to move back in sync - & in pretty short order. It will happen quicker if there is an accompanying asset sale, but one step at a time.

SD

I agree.  Once it is realized that PWT will survive this, there will be a big and rapid pop in the stock price.

Mind you, I dont expect this to happen Thursday.  Of anything the initial reaction will likely be downwards... seems to be the earnings trend right now. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on April 29, 2015, 06:31:32 AM
Bondholders are looking to the value of the assets backing their claim, & their place in the liquidation line. In a liquidation, the best assets will go first (you sell what you can). In their case there will be some sales at premium prices, and the proceeds would be enough to pay the vast bulk of the debt off. There's is little risk to NOT getting repaid, it could just take a while.

Shareholders are looking to the undeveloped moose pasture, it would sell at a deep discount, and take a long time to sell - if at all. Average the good & bad assets & you get a discount valuation, & why everyone is so certain they will not get top $; if you are going to be lazy, you get what you deserve.

We expect progressive re-rating as they pay down the remaining 450M creditors are demanding. Many ways by which they could do this, but once its done - liquidation is off the table, & the dividend clock starts ticking. A 12c/quarter dividend starting Jan-01, discounted at 4% is a $12.00 share price, conditional on the 450M being raised by June-30 & 2H oil at around $C 65. Every time the $C declines, &/or the light oil price rises, they get additional tail wind.

We expect an earnings release somewhat similar to what occurred with Precision Drilling. Prove the business did not collapse, & it becomes possible (under their investment guidelines) for some of the institutions to start investing. When the price rises above $5.00 it becomes a pretty easy sell. If there is an accompanying asset announcement, it could happen very quickly.

Keep in mind that you also don't need a done deal, announcing that you are in "exclusive talks with a seller" works as well. Once they are over the $3.50 mark, they could also do a private placement with very little difficulty.

SD

Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on May 05, 2015, 08:03:34 AM
The situation with Pennwest reminds in may ways of Fairfax circa 2004 and 2005:

At the time Fairfax was selling assets to pay down debt, and insurance claims.  Both operate in capital intensive, commodity industries.  Fairfax had to issue stock at below book, something PWT has not done so far.  Fairfax was supposed to go bankrupt, but didn't.  The perfect storm of KRW hit, and killed capital levels.  PWT got hit by the perfect storm of too much debt, and being unhedged going into the oil price crash. 

Pwt has put in some hedges to protect some of their oil selling price.  They have taken substantial write downs, and are cleaning up the debt levels.  If oil stays at this price or above they will be able to get the debt down to a sustainable level without too much pain.  One more small asset sale would get them there.  The discipline they have been forced into will be reflected in their operating costs. 

I have bought in dribs and drabs.  I lost alot on the downswing last year, exited most of the position, took my tax losses.  I am now back in with a larger position, as shares, at a new lower price. 

Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on May 05, 2015, 05:20:10 PM
I think that they are doing a very good job turning around the company and it is becoming increasingly clear that it will be a smaller meaner machine going forward. All focus is on the Cardium, Viking and Slave Point. If you read the various reports and press releases over the last year or so this is it.

So my take is that everything else will be sold, except maybe the Duvernay asset which would become a 4th core area eventually. If this is sold also, then I expect them to acquire more acreage in their 3 core areas and to turn into a cash machine with very little debt or allowing them to pay very juicy dividends.

However, they are moving very very slowly on asset sales. On the other hand, they were quite fast cutting cost and improving drilling efficiencies in their 3 core areas or turning from a marginal player into best in class. I still scratch my head as to why more wasn`t done early last year when selling conditions were very good.

Cardboard   
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on May 05, 2015, 05:54:19 PM
Obviously everyone would like to see faster progress, but we don't hold the late start against them. When you are king of the world, & riding an extended price spike - it is very difficult to prepare against that plausible but remote chance of a collapse in conditions. Being forced into a financial restatement at the start of all this, was actually a godsend.

This is where patience is going to reward you very well.

SD
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on May 19, 2015, 08:43:32 AM
looks like it resumed its road to zero

Obviously everyone would like to see faster progress, but we don't hold the late start against them. When you are king of the world, & riding an extended price spike - it is very difficult to prepare against that plausible but remote chance of a collapse in conditions. Being forced into a financial restatement at the start of all this, was actually a godsend.

This is where patience is going to reward you very well.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on May 22, 2015, 07:38:54 AM
Two directors bought on May 15th.

Jay Thorton: 75000 shares
John Byrdson: 200000 shares - now holds 750000 total

It is still a bet on commodity price recovery or at least stability at this point.  With light crude priced around 60 Us they get 72 CDn per barrel which is $7.00 above their assumptions for 2015.  The have hedged some of their oil and I would think they have hedged a bit more in the last couple of weeks. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on June 23, 2015, 04:43:08 PM
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11691110/Oil-investors-betting-on-crude-hitting-82-per-barrel.html

US$82 per barrel is $100.86 at the current USD/CAD FX rate of 1.23. Given the PWE sensitivity of $0.04/share per $C1 above $CAD65, this implies a $C1.43 increase in forecast eps starting around Jan 01, next year.

Pay 60% of that out as a dividend, and discount at 7.5% - and you get $11.32/share.

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on June 25, 2015, 03:02:13 AM
If it goes to $82, why would the exchange rate remain the same? That is a big assumption. If oil gets stronger, CAD may get stronger (vs. the USD) which means less of earnings in CAD compared to your scenario

CAD got lower as far as I know with the drop in oil, no?
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on June 25, 2015, 06:49:35 AM
Just being conservative on both the FX rate, the other products they sell, and the potential payout rate.

Agreed that most forecast the FX rate will be lower; but if oil is at US 82 - the price of gas & condensate will probably be up as well. I also assume that any premium for their light crude washes out any discount for being landlocked.

You also might want to keep in mind that if US 82 is the Dec 31 price; the incremental funds flow from prices higher than forecast between now and Dec-31, is highly likely to either exceed, or match, the 350M of remaining debt that they need to pay down. They may well not need to do any additional asset sales.

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on June 26, 2015, 02:41:12 AM
Yeah. OK

Me, would like to see more insider buying though
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on July 16, 2015, 11:03:31 AM
anyone adding at this level..
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on July 16, 2015, 12:06:36 PM
anyone adding at this level..

I did yesterday. It was mentioned by either the CEO or IR that they had hedging in place and the details would be disclosed at the end of Q2, which to my mind means they are in a better position now than they were when it was previously at this price.
Title: Re: PWE - Penn West Petroleum
Post by: 50centdollars on July 16, 2015, 12:10:15 PM
what makes you guys think oil is coming back?
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on July 16, 2015, 12:57:24 PM
what makes you guys think oil is coming back?

are you asking me?  I'll answer anyway... nothing makes me think oil is coming back, but PWE has stated they've put hedges in place which should help them keep their head above water.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 16, 2015, 12:58:52 PM
I have exited most of my position.  The central thesis has deteriorated for now (i.e. oil going back up).  They need the higher prices to reduce leverage.  My general feeling is that when/if oil reaches higher prices there will be a window of opportunity for Pwt in particular.  By this I mean that oil prices will rise well ahead of Pwt rallying. 

Right now they are operating on their lenders good graces, which is a dangerous spot.  Each day the pressure will mount to sell assets at fire sale prices - the same assets they use to generate cash flow.

Re: Hedging - this will keep them from going under completely.  It isn't going to help build the balance sheet or deleverage.  The hedges eat into cash flow steadily every day.  At the same time the hedges are necessary to survive. 

I was way too early on this.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on July 17, 2015, 03:39:15 PM
From investor village board with Nawar:

nonsensical selloff
The selloff in Canadian E&Ps of late is nonsensical. Canadian E&Ps are benefiting for a substantial currency advantage. If we take RBC's latest WTI price projections for 2015 to 2018, this what we get in terms of WTI vs. Edmonton Light (inclusive of a $5 differential to the advantage of WTI):
 
2015
WTI: $56
Edmonton Light: $63.7 CDN
 
2016
WTI: $72
Edmonton Light: $82.4 CDN
 
2017
WTI: $79
Edmonton Light: $88 CDN
 
Considering that BOC cut interest rates of late while the FED is likely to raise, the weaker Canadian dollar is here to stay, thus for a company like Penn West. A WTI averaging merely $60 in 2016 would translate into $71 in 2016. Edmonton Light. At $71 oil price would be only 25% below what Penn West was getting in Edmonton Light in the $90 to $100 WTI oil world. Yet, the stock price has lost close to 80% of its value in the meantime. Penn West core asset base in the Viking and the Cardium have very robust economics in the $60 WTI range (58% IRR in the Viking at $60 WTI according to Raging River - http://www.rrexploration.com/pdf/RRXMay062015Presentation.pdf) (30% to 80% ROR in the Cardium at $56 WTI according to Whitecap - http://www.wcap.ca/uploads/Presentations/WCP_-_2015_07_15.pdf). Penn West is deploying its capital almost exclusively in those profitable areas, while other less attractive areas are still cash flow positive in terms of existing production costs, thus any cash generated from previously drilled producing wells (but not profitable to drill today areas) is being recycled into a profitable core operations, this will render the company increasingly sustainable as a larger portion of production is transferred to the core.
 
Penn West stock price is influenced by two factors: one is external (oil prices) and the second is internal (operational efficiency, balance sheet management ... etc.). In terms of internal factors the company has made noticeable efforts to reduce costs (will likely become yet more evident after Q2 numbers are announced). In terms of balance sheet management, already $400m in asset sales have taken place at very accretive metrics to our current 30K per flowing valuation, and additional assets sales are lined up. Penn West management is far from standing still in this environment, they continue to manage the business with an eye toward making it completely sustainable and cash flow positive in ($70+ Edmonton Light -$60 WTI- in 2016).
 
On the other hand the oil market balancing process is well underway, 60% less rigs drilling in North America and 15% less worldwide, hundreds of billions of dollars in deferred and cancelled capex, tens of thousands of oil workers laid off and re-surging oil demand worldwide. The industry has responded and the consumer has responded, the only required element now is: additional time, in order to allow for supply to diminish as a result of the steps taken by the industry and for demand to catch up with OPEC’s excess supply. This process still requires another 18 months to complete, after which the market should return to a balance state in the $75+ WTI range. The current downturn in prices below $60 WTI will only accelerate the balancing process and thus should be welcome by long term oil investors rather than scorned
 
There is no magic bullet here, Penn West internal re-positioning process is a slow and a gradual undertaking, while the oil market own turnaround is even slower. There will be some down swoons like we are witnessing today as the market completely re-adjusts. I have capitalized on Penn West’s weakness of late and added yesterday and today to an already large position, and while the longs are yet to vindicated in their convection, I believe we are 8 months closer to the end of this down cycle, and oil will likely bottom at a higher low than it did in January in the next couple of weeks before resuming its move to $60+ in Q3.
 
Good luck & enjoy your weekend.
 
Regards,
Nawar     
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 28, 2015, 06:45:56 AM
You might want to look at their recent PP deck, do a little pricing research, & scan the Winnipeg paper.

200M cut in run-rate OPEX, 10% (62M) savings in Capex to market conditions;
The bulk of their sales in Q2 were above budget, & average FX is roughly 5% better than budget;
Highly likely that the 15,000 bbl/day hedge at $US50 expiring June 30, was rolled at $US60+;
Highly likely that Spearpoint has a sale MOU under it;
Bath-tub loss last quarter.

Good luck

SD
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on July 28, 2015, 07:09:01 AM
The interesting thing about PWE is the debt is trading near par versus at less than 80 for most other distressed names.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: thepupil on July 28, 2015, 07:16:05 AM
The interesting thing about PWE is the debt is trading near par versus at less than 80 for most other distressed names.

Packer

I looked into this back in the fall/winter. The debt doesn't really seem to "trade" at all and is not in dealer runs from the trading desks at the U.S. Investment banks. If you are looking at Bloomberg, those might be stale or unrealistic marks. If you are getting an actual quote from a dealer, then that is interesting. I asked around here if anyone knew anyone at a Canadian desk that traded them, but that didn't get anywhere.
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on July 28, 2015, 07:18:28 AM
It is from Bloomberg so it would be interesting if anyone at a desk has a recent trade.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 28, 2015, 08:07:10 AM
Its consistent with what you would expect, & reflects their coverage ratios.

SD

Title: Re: PWE - Penn West Petroleum
Post by: dutchman on July 28, 2015, 08:15:16 AM
SharperD have you been adding to your position ?   Anything shaken your confidence in their survivability ?  Thanks
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 28, 2015, 09:48:02 AM
We added a modest trading overlay at the ultra-low prices.
By the end of next week we will know if we were right  ;)

SD
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on July 28, 2015, 09:56:56 AM
We added a modest trading overlay at the ultra-low prices.
By the end of next week we will know if we were right  ;)

SD

What is your average cost on PWE?
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 28, 2015, 10:07:53 AM
Well under $C 2.00.
Courtesy of starting our hedges after the Feb run-up, and the generosity of all the short folks out there.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on July 28, 2015, 10:37:33 AM
Thanks.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 30, 2015, 09:13:41 AM
Earnings Release:

http://pennwest.mediaroom.com/index.php?s=27585&item=135253

They aren't making any headway on the debt with crude prices during the entire second quarter, let alone now.  Today it is costing them more to operate than they are making.

Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on July 30, 2015, 09:58:24 AM
Earnings Release:
Today it is costing them more to operate than they are making.

I am trying to figure out if it's possible for them to fix this by changing the way they are operating through sizing working capx to fit the current pricing environment or is it only fixable by oil prices being higher.  I know higher oil prices could fix it but trying to figure out if they have enough time to fix operations before it goes under at these oil prices.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 30, 2015, 10:20:05 AM
Look closer at P16, & P2:

Consequently, the Company is updating its funds flow from operations guidance range from $500 - $550 million to $350 - $400 million. Funds flow from operations was 151M for 1H; to get to 375M on the year, 2H flow (resulting from what they control) must be 224M. It is highly likely that the 73M difference is the July 2015 Power Point 200M of expected annual opex reduction kicking in. You do not see it this quarter, because it does not start until next quarter.

Look closer at P12:

The gain on asset dispositions (95M) in the second quarter of 2015 related to the Company’s royalty disposition and other non-core asset dispositions which were closed in the period. During the second quarter of 2015, Penn West reduced goodwill by $28 million as a result of a portion of goodwill being allocated to non-core property disposition.

Whatever they sold had a gross gain of 123M. The language also very clearly distinguishes between royalty & other dispositions (plural). We know there was a minor asset disposition for around 54-74M (If memory serves), but it is highly unlikely that these two sales together generated a 123M gain. It looks like there was another (& sizeable) disposition, agreed to in Q2 that is going to settle sometime in the 2H. What are the odds it’s Spear Point?

It would seem there are more announcements to come, and that by end of Q3 they will have met the agreed dividend restriction. What are the odds that the Q3 dividend declaration is going to be for more than 1c/share?

Management is clearly getting its ducks in order.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on July 30, 2015, 12:39:56 PM
"What are the odds that the Q3 dividend declaration is going to be for more than 1c/share?"

I would say none even if they achieve the $650 M asset disposition target which is highly likely by that time IMO.

Reason being that they are still planning to outspend fund flows from operations on Capex. So raising the dividend would not make sense or deviating from sustainability goals. It was kept at $0.01 per quarter or about the lowest level possible to keep in dividend investors such as indexers or to avoid more pressure on the stock. Current yield is also not insignificant with the price having dropped so much.

What is more important than the dividend is progress being made by the company:
- Operating cash costs are down 25% year over year.
- Well drilling and completion costs are down 20% in the Cardium and 15% in the Viking.
- Higher use of technology or devices such as reclosable sleeves in the wells to improve production which was first discussed by Crescent Point earlier this year or the perceived leader in Canada for technology usage.
- They moved from a large working capital deficit to neutral or a debt reduction if you will of $275 million.
- Production is flat or at guidance and the liquid content is going up or now at 69%.
- Higher netback production or from increasing light oil production in two of the lowest cost areas of North America.
- Still well within debt covenants or Senior debt to EBITDA at 3.2 times vs 5.0 limit. $700 million available out of $1.2 billion on credit facility.
- 20% of liquid production hedged at $70.40 - $72.57 CDN for the rest of this year. So keep upside with some protection at higher prices than current.
- Debt coming down slowly. Oil prices improvement would surely help on that front. As the $650 million gets done and with some luck on the oil price, fire sale pressure will abate and it will become much easier to take it down. Once it crosses the $2 billion net debt level, I think that we will see a change in investors attitude.

Cardboard


Title: Re: PWE - Penn West Petroleum
Post by: newbee on July 30, 2015, 12:46:20 PM
SD,
your quote "It is highly likely that the 73M difference is the July 2015 Power Point 200M of expected annual opex reduction kicking in". Where is this discussed? Can you please show me some pointers.
Also, what do you think about the hedging. They hedged only 12,500 bbls/d.(1/4 of the crude) and as per the CC they are comfortable with the hedging for 2H2015. Wouldn't be prudent to hedge most of the crude at that price till balance sheet issues are resolved? Can you please comment?
Thanks in advance.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 30, 2015, 01:50:52 PM
Cardboard/SD,

A dividend increase is years away now. 

They haven't reduced debt at all.  They simply used their Credit Line.  Net Debt is unchanged and that was with an entire Q of much higher Crude prices.

In other words their daily outgoes are exceeding the daily incomes, right now.  Watch that line of credit.  It was untapped at year end and is now 300 million used up.  Without an increase in crude prices it will pass 500 M by the end of 3rd Q without any drop in the other debt. 

There is lots of time on this one.  I have definitely seen my thesis change.  I hate sinking ships, especially slowly sinking ships bolstered by false hope.  Management is putting on a brave face in a bad situation.  At these crude prices they go under, bankrupt, or they get bought out for a small premium.  The market is right this time. 

Edit: My numbers above are not quite right:

The situation and IMO the only thing you need to know right now about this company:

Dec. 31,14: Senior Notes: 2149; Total debt: 2149
June 30, 15: Senior Notes: 1722; Bank Facility: 484; Total Debt: 2206

They have added 50 Million of debt in 6 months while selling hundreds of millions in assets?

I think solvency is the real issue absent a significant oil price rise. 
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on July 30, 2015, 05:50:18 PM
Uccmal, what about the fact that they are deploying capital on wells that have high rates of return even at low prices:
http://screencast.com/t/H6AsnyQPulM (http://screencast.com/t/H6AsnyQPulM)

which seems to go quite quickly compared to total production:
http://screencast.com/t/ytSypfKTU (http://screencast.com/t/ytSypfKTU)

?  :P
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 30, 2015, 07:23:35 PM
Uccmal, what about the fact that they are deploying capital on wells that have high rates of return even at low prices:
http://screencast.com/t/H6AsnyQPulM (http://screencast.com/t/H6AsnyQPulM)

which seems to go quite quickly compared to total production:
http://screencast.com/t/ytSypfKTU (http://screencast.com/t/ytSypfKTU)

?  :P

Is it a fact if it hasn't happened, yet?

I am also troubled by no insider buying for over two months.  Management is worried, which isn't a bad thing.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on July 30, 2015, 07:33:18 PM
No insider trading is normal and the law before quarterly results are released.

This is a market weakness continually exploited by shorts: point out that there has been no insider buying and short more as the share price keeps on plunging due to panic selling before results are finally issued.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on July 30, 2015, 07:54:09 PM
Other things that you have ignored Al on the net debt issue is a large reduction in acccounts payable. Then there is the large move in the exchange rate from 1.16 at Dec 31 to 1.25 on Jun 30. That is pretty significant on over $1.5 billion of notes denominated in USD with only $400 million or so hedged against currency movement. I also understand it has gotten worst in July.

As oil returns to more normal levels, the CAD should appreciate substantially and become a tailwind on the debt front.

On that one, over $200 billion of projects have been cancelled globally. This week, we have finally seen the first large drop in U.S. oil production or down 151,000 barrels per day for Lower 48 States. Rig count reduction is and will have an effect. Stripper wells operator are also likely on their last leg.  2015 will be the highest consumption year ever for oil and 2016 should be even higher. Each year, 5 to 7% of global oil production disappears due to the decline rate.

Negativity around natural resources has reached a crescendo with 3 months of unabatted selling and bad news. I would not be surprised to see a stealth bull market emerge from here.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Pelagic on July 30, 2015, 07:56:13 PM
No insider trading is normal and the law before quarterly results are released.

This is a market weakness continually exploited by shorts: point out that there has been no insider buying and short more as the share price keeps on plunging due to panic selling before results are finally issued.

Cardboard

Learn something new everyday. I was curious about this myself regarding PWE especially in the last couple days it seemed like a great opportunity for insiders who had been buying pretty regularly through the downturn to pick up some shares.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on July 30, 2015, 08:16:30 PM
Uccmal, what about the fact that they are deploying capital on wells that have high rates of return even at low prices:
http://screencast.com/t/H6AsnyQPulM (http://screencast.com/t/H6AsnyQPulM)

which seems to go quite quickly compared to total production:
http://screencast.com/t/ytSypfKTU (http://screencast.com/t/ytSypfKTU)

?  :P

Is it a fact if it hasn't happened, yet?

I am also troubled by no insider buying for over two months.  Management is worried, which isn't a bad thing.

This was H1 2015... so it is happening... why is it surprising?
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 31, 2015, 04:14:38 AM
Re 200M projected Opex saving. We downloaded the Corporate Presentation July 2015, on July 28. At that time there was a little more disclosure in the Execution and Cost Control component of the presentation; which has been removed from the current version posted. As it looks like they may have disclosed more than intended, we would rather not re-publish it.

Given the current 2nd round of cutting rippling through the industry, additional opex saving should not be unexpected. Some of it will also come from avoided operating cost on pending asset sales.

Re hedging: The same PP deck indicated they had a hedge on 12,500 bbls/day at USD 50, expiring June-30. They have simply rolled it up and out in a series of 3 month swaps, with a modest increase to 15,500 bbls/day in Q1-2016. Page 14 of the current Corporate Presentation July 2015.

This is their business, they are closer to the market than we are, and we are not about to second guess them. They may well also be quite right, as we also expect the post Halloween market to be quite a bit different from today. If there is an asset sale they will also be hedging more than their current 14% (12,500/91,000).

Re total debt change. Q2/2015 working capital (CA – CL) did decline to -332M, but it is essentially the same as the Q2/2014 number of -335M; and reflects the seasonality of the business. Q2 versus Q1 they paid down 152M of seasonal change in working capital, as well as the debt reduction. We don’t see an issue.

If the projected Opex saving is real, they are profitable at Q2 prices. Restoring the dividend back to the 3c/quarter that it was immediately before the covenant negotiation, is only an additional 11M, & hard evidence of the progress. Highly likely that it is also a bonus trigger.

Overall it was a solid quarter but with no headline, markets are indifferent. It will change very quickly when their asset sale is announced.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 31, 2015, 04:15:08 AM
Other things that you have ignored Al on the net debt issue is a large reduction in acccounts payable. Then there is the large move in the exchange rate from 1.16 at Dec 31 to 1.25 on Jun 30. That is pretty significant on over $1.5 billion of notes denominated in USD with only $400 million or so hedged against currency movement. I also understand it has gotten worst in July.

As oil returns to more normal levels, the CAD should appreciate substantially and become a tailwind on the debt front.

On that one, over $200 billion of projects have been cancelled globally. This week, we have finally seen the first large drop in U.S. oil production or down 151,000 barrels per day for Lower 48 States. Rig count reduction is and will have an effect. Stripper wells operator are also likely on their last leg.  2015 will be the highest consumption year ever for oil and 2016 should be even higher. Each year, 5 to 7% of global oil production disappears due to the decline rate.

Negativity around natural resources has reached a crescendo with 3 months of unabatted selling and bad news. I would not be surprised to see a stealth bull market emerge from here.

Cardboard

Maybe so, maybe not, on the stealth bull. I actually have substantial exposure to oil via Mullen Group, and Russell Metals, both bouncing along multi-year lows.  Both are well capitalized.  Both are, and will continue to pay their dividends.  Both will recover much more rapidly and sooner than PWT, since they supply the services.  In total, MTL, and RUS, with dividends, and capital gains will provide as much upside as PWT, with less risk.  PWT could return to $15.00 say, but it could take years.  Too many coulds, ifs, etc. 

I have probably lost my stomach for PWT style turnarounds.  Too many SFk/fbk, DGI, YPG, scenarios over the years.  I am fully invested in really good companies to be bothered with this shit: MTL, RUS, FN, SSW, BEP.UN, WFC, JPM, AIG, - FN and SSW have both announced record profits, and are cheap. 

I have held SSW for nearly 7 years and have nearly made my original purchase price back in dividends.  Of course, survivorship bias applies.  I have never been very good at cigar butt investing, either - I tend to over concentrate. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on July 31, 2015, 04:38:14 AM
Inclined to agree overall. We see it that at $2; it doesn’t take much (or that long) to get to $4, & double. But at $4 it takes more, & warrants taking at least some of the gain & redeploying it elsewhere.

SD
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on July 31, 2015, 07:44:51 AM
I definitely agree that MTL and RUS have much less risk and arguable much better upside potential.  I recently initiated a RUS position too as the company rarely sells for current multiples.  The dividend may be cut but long term the company is solid and well run. 

PWT is not going to return to $15, that is certain, unless investors are totally irrational.  The falling oil prices have resulted in a permanent drop in the asset value for all oil companies

I think those who believe the investment here is "it used to be $4 and it will go back there" are engaging in wishful thinking.  The company is selling for the fair value of the reserves.  Keep in mind the reserve report uses a price deck that is 17% higher prices than today.  There is very little left for the equity holders as oil has fallen recently.  Falling CAD has helped somewhat, but it hasn't been enough to offset the drop in oil.   


Maybe so, maybe not, on the stealth bull. I actually have substantial exposure to oil via Mullen Group, and Russell Metals, both bouncing along multi-year lows.  Both are well capitalized.  Both are, and will continue to pay their dividends.  Both will recover much more rapidly and sooner than PWT, since they supply the services.  In total, MTL, and RUS, with dividends, and capital gains will provide as much upside as PWT, with less risk.  PWT could return to $15.00 say, but it could take years.  Too many coulds, ifs, etc. 

I have probably lost my stomach for PWT style turnarounds.  Too many SFk/fbk, DGI, YPG, scenarios over the years.  I am fully invested in really good companies to be bothered with this shit: MTL, RUS, FN, SSW, BEP.UN, WFC, JPM, AIG, - FN and SSW have both announced record profits, and are cheap. 

I have held SSW for nearly 7 years and have nearly made my original purchase price back in dividends.  Of course, survivorship bias applies.  I have never been very good at cigar butt investing, either - I tend to over concentrate.
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on July 31, 2015, 08:08:47 AM
really not seeing how mtl is cheap. the most it earned when oil was around $100 was $1.58. now energy prices are way lower. how is it going to earn that again in the near future? the stock is around $19. So it's over 12x peak earnings. It pays out $1.20 in dividends. but it appears they aren't even earning the dividend now. the stock has market cap of $1.8b and tangible book value of around $500m. in a good year it earns around $160m ebit (average). they have around $500m net debt. so $2.3b tev over $160m earnings during a good cycle is 14x. the stock is lower than it was 10 years ago. not sure I see an extraordinarily cheap stock here. I see a company that chooses to pay out most of it's earnings. I see the stock being propped up by the dividend. How is it going to grow even if energy prices recover when it pays out most of it's earnings?

I believe if we get oil back into the $70s the upside in pwt is far far better than the upside here. anyway that was just a quick analysis and I may have missed something big. The guys who own this know it way better. So I would listen to them on this one because they've done the work.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on July 31, 2015, 09:03:14 AM
really not seeing how mtl is cheap. the most it earned when oil was around $100 was $1.58. now energy prices are way lower. how is it going to earn that again in the near future? the stock is around $19. So it's over 12x peak earnings. It pays out $1.20 in dividends. but it appears they aren't even earning the dividend now. the stock has market cap of $1.8b and tangible book value of around $500m. in a good year it earns around $160m ebit (average). they have around $500m net debt. so $2.3b tev over $160m earnings during a good cycle is 14x. the stock is lower than it was 10 years ago. not sure I see an extraordinarily cheap stock here. I see a company that chooses to pay out most of it's earnings. I see the stock being propped up by the dividend. How is it going to grow even if energy prices recover when it pays out most of it's earnings?

I believe if we get oil back into the $70s the upside in pwt is far far better than the upside here. anyway that was just a quick analysis and I may have missed something big. The guys who own this know it way better. So I would listen to them on this one because they've done the work.

Not extremely cheap but they seem to manage.  Ten yrs ago was an anomaly to the high side due to the income trust boom. 
Very well managed, serial acquirer that is now into general trucking.  Buy companies, pay down debt... rinse, repeat. 
Feel free:
http://www.mullen-group.com/wp-content/uploads/2014/12/At-A-Glance_June-2015-Final-web.pdf
I dont want to coop the Pwt thread.  Read the chairmans letters.  On par with Watsa or Buffett (ok maybe not WEB). 
Title: Re: PWE - Penn West Petroleum
Post by: dutchman on July 31, 2015, 09:08:23 AM
Uccmal, kevin, are referring to: Metaux Russel when you say Rus ?   There's no thread for this one, but can you point me to any goid writeup on it?   You guys seem to really like it.  Thanks
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on July 31, 2015, 09:41:55 AM
Yes, the parent company is Russel Metals, their Quebec distributor is Metaux Russel.  I have no idea why google finance calls them that. 

The best writeup is the five year financial highlights on their website.  After that I would recommend the Annual Report.

Uccmal, kevin, are referring to: Metaux Russel when you say Rus ?   There's no thread for this one, but can you point me to any goid writeup on it?   You guys seem to really like it.  Thanks
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on August 12, 2015, 11:42:15 AM
anyone concerned the real possibility now this will be a zero at the end for equity holders?

Inclined to agree overall. We see it that at $2; it doesn’t take much (or that long) to get to $4, & double. But at $4 it takes more, & warrants taking at least some of the gain & redeploying it elsewhere.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 12, 2015, 12:00:13 PM
Ya sure. So what is your point?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 12, 2015, 02:43:01 PM
It is highly unlikely that they go to zero. It is much more likely that someone elects to take a run at them, versus drill for the oil – especially if they can settle at a higher valuation by paying in stock versus cash. The nice thing about commodity cycles is that they are also just that – cycles.

Six months out, everybody will be singing in a different key.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on August 12, 2015, 04:16:02 PM
Six months out, everybody will be singing in a different key.

SD

The thing with commodity cycles is that they sometimes last 6 months, and they sometimes last 15 years...
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 13, 2015, 06:38:59 AM
Quite agree ..... but six months out we could all well be singing the anthem of a different company, simply because this one got gobbled.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on August 13, 2015, 06:47:22 AM
Quite agree ..... but six months out we could all well be singing the anthem of a different company, simply because this one got gobbled.

SD

But would that different company be making much more money if oil stays low? Would they pay much of a premium, and what will PWE go for if things keep getting worse for 6 months?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 13, 2015, 07:06:29 AM
Well Sharper, if a buyout is what you are wishing for, then I think you are wasting your time. There are much safer opportunities out there to get average returns.

This could have happened a long time ago and they likely said no to much higher offers. Then the history of Legacy is quite telling about what kind of price you can hope for. Moreover, if you are getting shitty paper in exchange as CPG has turned out to be for many who kept holding, then your downward spiral will continue. Then the new Alberta government and little hope for a V shape recovery for oil essentially killed again the market for asset sales.

This company IMO is led by a bunch of stubborn people determined to prove everyone wrong: Roberts and George. It would have been easy IMO to sell a crown jewel and make that company near debt free a while ago. The Viking or Cardium could easily have been sold for $80,000 to $100,000 per boe/day earlier this year. They could have sold the Duvernay, Waskada and many others in 2014 but, they never seemed to accept the price. One or a few of these sold and the company would have been on a solid footing. However, they don't want to. They want to keep everything until the market turns up.

So I doubt that they will sell anything unless the bankers tell them to due to a covenant breach which is for sure coming if this disastrous price for oil continues. Unfortunately, that will mean fire sale price. That is what you get with stubborn managers.

So the only hope to make money here is to get a reasonable rebound for oil or to $60 WTI for them to continue improving operations, paying off some debt via cash flow and more importantly via non-core asset sales.

As for the oil price, especially after yesterday's EIA report, it is particularly discouraging. We had an inventory draw that matched analysts expectations. A gasoline draw that was much higher than thought. And, U.S. production resumed its long awaited decline. A bear had to look long and hard to find negatives in that report. Yet the price is the lowest of the year. Of course, the idiotic Saudis and Irakis pumping like crazy and more than their quotas is not helping while China is slowing down, although you see no sign of that in their oil consumption. So, I don't know anymore!

Cardboard

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 13, 2015, 10:21:38 AM
For just about everyone, toughing it out is by far the better option. As it is pretty clear that crude prices are not going to stay at these current levels for any extended period, it is really more of a matter of surviving the remaining desert crossing. Q3 may well be a sh1te quarter, but that’s about it.

Just about all would agree, that PWE has many options - beyond asset sales. Most would argue that the wait and see period is coming to a close, and that they are going to have to get off the pot soon. If they do nothing, it is highly likely that they will get gobbled.

Prudence argues for some kind of long term JV or royalty agreement, with either a pension fund or a state entity; they have lots of friends. Most would have no issue if the royalty stream came from one of their 3 major plays; as they would still control production, & could replace that flow relatively easily.

More telling, is that there have been no additional insider buys since management emerged from lock-up. If we had the additional risk budget - we would be buyers at these levels, and we would assume management had a similar view. That absence implies that management is under a restriction of some kind. A good sign.

Agreed it is a frustrating hold, it is getting late in the summer, and there are lots of stubborn people involved. Just keep in mind that stubborn does not mean stupid, and the fat lady eventually runs out of song.

Do something else, look the quote up just once a week; and much of the angst disappears.
Let them get on with it.

SD
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on August 13, 2015, 11:40:23 AM
i would say lower the stock goes the lower oil goes the less options they have. the mistakes are really from last two years. now they are trying to recover from them at an awful time. CPG just said they plan to "wait". the problem is buyers are only human. they get scared as prices decline and happy when they are rising, causing them to pay "happy" prices.  no deal at this point will be a good one for pwt shareholders. a deal done in early 2014 - good. now, not so good. Once a stock goes under a buck it's in distress whether it really is or not. that's the perception anyway. remember in Jurassic park one of the themes was "nature finds a way". that's how I feel about insiders. if they see money on the table they take it. "nature finds a way".
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on August 13, 2015, 02:56:33 PM
Quote
As it is pretty clear that crude prices are not going to stay at these current levels for any extended period, it is really more of a matter of surviving the remaining desert crossing.

I guess I don't have your ability to predict commodity prices. It's not clear to me at all that this can't last for an extended period of time. It's very possible to think up a narrative for why these prices are low, but I can also think one for why prices could stay at these levels or go even lower for years.

The gold people have been predicting a bounce in short order since 2011. The natural gas people for a few years too...
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 13, 2015, 03:23:52 PM
Quote
As it is pretty clear that crude prices are not going to stay at these current levels for any extended period, it is really more of a matter of surviving the remaining desert crossing.

I guess I don't have your ability to predict commodity prices. It's not clear to me at all that this can't last for an extended period of time. It's very possible to think up a narrative for why these prices are low, but I can also think one for why prices could stay at these levels or go even lower for years.

The gold people have been predicting a bounce in short order since 2011. The natural gas people for a few years too...
I've been thinking about this as well for the past few days. When oil dropped everyone went on about how is just the Saudis playing tough and it'll all be reversed at the April OPEC meeting. Then April came and nothing happened. Then you got a bit of a bump and everyone was like see party is starting up and then it cratered again. So I don't think anyone has any clue.

However, I think that Canada is in a pretty tight spot. I'm not sure if we have the highest cost of production but we're definitely near the top. Iran and Iraq are near the bottom and they're ramping up production. So you either have a surge in demand to absorb the new production (I'm not going to go into the macro picture) that's not looking good. You could have the new production replacing declining production in other areas - not in the short term. Or someone needs to cut production - namely the high cost producers.

In this scenario Canada doesn't look good and the bad producers in Canada such as PWE look horrible.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 14, 2015, 06:05:35 AM
The oil market is an oligarch of sovereign states. Many sell one product - oil.

For sovereigns, the cost of production is the cost of the sovereign social programs & wars divided by the output of the sovereign oil fields. As these costs rise over time, & reservoirs deplete; without change, the sovereign needs a higher oil price - every year.

In a stable market, at any given price; market volume is met from the lowest cost producers first. The lowest cost producer produces at their maximum, then the next lowest, until total market volume is met. The low cost producers are SA, Iran, & Iraq.

A swing producer controls market price by cutting back their low cost production, in favour of production from higher cost producers. This used to be SA, but became Iran when sanctions were imposed. With sanctions now lifted, these 3 producers need to re-establish their market share, and produce at their maximum. The resultant oversupply drops price until the market eventually clears. The position today.

We know that current total SA revenue is too low to meet spend; were it adequate they would not have gone to the global bond market twice so far this year. It is highly likely that Iran & Iraq have similar issues. The collective solution is to cut back production & raise price, such that revenue now equals cost. Each higher cost producer (Russia, US) is also incentivized to persuade the low-cost producers to see the light. There is a sunset mechanism.

Most would argue that higher prices are inevitable; many would also expect the rise to be almost instantaneous as buyers rush in to pick up whatever cheap surplus stock they can lay their hands on. When it happens, most would like to be in something highly torqued to oil prices.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 14, 2015, 06:26:18 AM
I agree with you for the most part SD and I still believe that PWT is really lucky to have many assets and some great ones which gives it options. My concern is timing for oil price recovery and management intent since they lost all of 2014 before they finally decided to be serious about selling non-core assets. They also have stated that they already reached their level of hedging for oil in 2015 at around 20% of liquids. So little protection there.

However, I do not understand the Saudis strategy. They have already flooded the market with oil which has brought massive cuts worldwide. The majority of countries are now showing production decline including the United States and it will continue. If OPEC was producing its quota, there would be no over-supply globally. None!

I don't know if they are trying to develop new production to end up with instantaneous spare capacity as they used to have and need to be a price dictator but, I firmly believe that the lesson has been learned by other producers that OPEC can come at any time and flood the market. I don't know any financier who will be funding expensive projects going forward without massive collateral deposit, lower debt level and hedges. This makes a lot of projects impossible to finance. For example, Brazil was supposed to produce over twice the amount of oil from offshore by 2020 than is now forecasted. That is a couple million barrels a day right there.

Some will now come out and talk about the great economics of U.S. shale... If they are so great, then why Continental Resources which has some of the highest EBITDA margins that I have seen and led by a bull is forecasting a decline in production by the end of 2015?

So yes, if the Saudis simply cut back their production to their agreed OPEC quota, then oil would rise rapidly above $60. Then all they have to state is that they will keep an eye on supply. They would make a lot of money and producers worldwide would simply try to fund and maintain their actual production.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on August 14, 2015, 08:02:48 AM
may I ask the PWE percentage in your portfolio? Did you buy any hedge to protect this position?

The oil market is an oligarch of sovereign states. Many sell one product - oil.

For sovereigns, the cost of production is the cost of the sovereign social programs & wars divided by the output of the sovereign oil fields. As these costs rise over time, & reservoirs deplete; without change, the sovereign needs a higher oil price - every year.

In a stable market, at any given price; market volume is met from the lowest cost producers first. The lowest cost producer produces at their maximum, then the next lowest, until total market volume is met. The low cost producers are SA, Iran, & Iraq.

A swing producer controls market price by cutting back their low cost production, in favour of production from higher cost producers. This used to be SA, but became Iran when sanctions were imposed. With sanctions now lifted, these 3 producers need to re-establish their market share, and produce at their maximum. The resultant oversupply drops price until the market eventually clears. The position today.

We know that current total SA revenue is too low to meet spend; were it adequate they would not have gone to the global bond market twice so far this year. It is highly likely that Iran & Iraq have similar issues. The collective solution is to cut back production & raise price, such that revenue now equals cost. Each higher cost producer (Russia, US) is also incentivized to persuade the low-cost producers to see the light. There is a sunset mechanism.

Most would argue that higher prices are inevitable; many would also expect the rise to be almost instantaneous as buyers rush in to pick up whatever cheap surplus stock they can lay their hands on. When it happens, most would like to be in something highly torqued to oil prices.

SD
Title: Re: PWE - Penn West Petroleum
Post by: enoch01 on August 14, 2015, 08:57:28 AM
You can smell the panic.
Title: Re: PWE - Penn West Petroleum
Post by: bbarberayr on August 14, 2015, 09:56:18 AM
Another problem for the Canadian producers is Western Canadian Select oil prices last week were down to $23.50 with WTI at $43.50 (source TD).

There is a problem with a couple of pipelines, so the Canadian oil is having trouble getting to market.
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 14, 2015, 10:05:41 AM
Another problem for the Canadian producers is Western Canadian Select oil prices last week were down to $23.50 with WTI at $43.50 (source TD).

There is a problem with a couple of pipelines, so the Canadian oil is having trouble getting to market.
Yea, transportation is a bitch, but also WCS is a more inferior blend than WTI.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 14, 2015, 10:33:21 AM
Ok, so the flush below $1 U.S. on heavy volume has been done. You could see it holding at $1 U.S. all day yesterday with holders likely praying for it to hold to avoid NYSE delisting... Too easy for the manipulators. A classic!

Regarding WCS, this is heavy oil. It mainly affects their Peace River production. You would have to get a quote on Edmonton Par or now Canadian Light Crude Blend to see what light oil is selling for in CDN$ or the majority of their production. This typically tracks well WTI with a slight discount.

At this point, the share price no longer matters. If this company makes it, the key is to hold the shares. It could go lower and you could buy more for the same money but, we have no idea. Just speculation.

I mention that since there are 500 million shares outstanding and roughly $2.1 billion in net debt. So weather it trades at $1 CDN or $1.20, it makes very little difference on a private value basis or EV. This company produces 91,000 boe/day with 69% liquids. That is a grand total of $30,000 CDN per boe per day and $8.25 per boe of reserve.

This is like paying Bellatrix valuations but, BXE is 70% gas!!! You will have to look hard to find such a cheap oil stock.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: gary17 on August 14, 2015, 10:43:47 AM
Well
i just bought some - i am a shoot first ask question later.


So now I need to figure out the IV for PWE...  got some work to do now :))
Title: Re: PWE - Penn West Petroleum
Post by: Picasso on August 14, 2015, 11:32:56 AM
This suckers heading to zero.

Contrarians can take my post with no substance as a reason to buy up the yin-yang.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 14, 2015, 12:20:07 PM
We are at our maximum weighting, our cost base is well under $2.00/share, & roughly 40% of our position is reinvested house money. We have a long time horizon; O/G & special situations are also well within our circle of competence. Our hedge is the quality & number of PWT assets, our time horizon, & our expertise in securities analysis.

Few would disagree that Albertan heavy oil is in very deep trouble, and that the fear of pending massive write-offs and big jumps in unemployment is rightly palpable. However, we would put it to you that similar fear exists in the US, Russia, & amongst OPECs other non-ME partners – where there are other high cost projects.

PWT sells primarily light oil, not heavy oil.
Yes, some of their production might get shut in – but the vast bulk of it will not be. And now that every Albertan heavy oil producer needs to rapidly lighten production – while they still can; a short to medium term light oil royalty is highly likely to see a lot of bidders.

Canadian o/g is a small community, & ya dance with the one that brung ya.
It would make an awful lot of sense for PWT to royalty off almost ALL its light oil production, pay off its debt, & reinvest in drilling its existing leases. Keep roughly 20% of its existing production to meet existing hedges - & leave all new production at spot. PWT becomes pretty much bullet proof, they get to keep all their people, & the buyer of that royalty owes them a very big favour.

The smartest execution would be a sale of the underlying royalty to a pension plan, and the plan selling a call option on that underlying to a heavy oil producer.

PWT has lots of smart folks.

SD
Title: Re: PWE - Penn West Petroleum
Post by: supertutti on August 14, 2015, 12:51:40 PM
I bought in some as well. Lets roll the dice.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 14, 2015, 02:18:40 PM
SD,

They have done some of that in the Viking along with the sale of their existing royalties. It is a good idea since the market for yielding assets is very strong. Everything that pays a stable dividend to public investors gets a very high multiple.

Another idea that I was thinking about but, I don't know enough details about what they own: midstream assets. What do they own in terms of midstream that is used by themselves and third party? Turning that into a public vehicle is worth again big bucks due to the yield structure.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: adesigar on August 14, 2015, 02:19:03 PM
Does anyone have a list of similar companies or an ETF. I  was thinking of buying a  basket instead of just one.
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 17, 2015, 11:28:29 PM
What about the land? They own 4.5 million acres of land. It seems majority is still undeveloped, judging by other companies. So they could sell that for lik 800$ per acre? If they sell 3.5 million acres, that is like 2.8 billion$. It would take a while, but this + funds flow from remaining 230m BOE of already developed reserves could be worth another 1.5 billion before they run out in about 7 years? This assumes they generate about 200m$ per year, not really adding to their developed resources.

Then give remaining value of 800m to the other 250m of probable reserves (800$ per acre for 1m acres, with 250m of 2p O&G in it). Subtract 4.5b of liabilities and you get 400m$ for the equity? And this seems to be a worst case scenario.

Or am I way off here.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 18, 2015, 06:04:03 AM
You sell what you can, not necessarily what you would like to. The good news is that the land is worth the most to PWT, & with the debt monkey gone - they are highly likely to be able to drill it successfully.

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on August 18, 2015, 07:05:36 AM
I cant reconcile the fact that there is no insider buying. How do you all think about this? What is your reasoning? The pros and cons.

Definitely good, that there are no sellers too

Of course, always the best to do my own deep d&d. I just use abit Scuttlebutt-ing
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on August 18, 2015, 07:25:18 AM
I cant reconcile the fact that there is no insider buying. How do you all think about this? What is your reasoning? The pros and cons.

Definitely good, that there are no sellers too

Of course, always the best to do my own deep d&d. I just use abit Scuttlebutt-ing

The hope is that they can't because there is a transaction underway....
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 18, 2015, 08:10:25 AM
Fwiw the Riddell companies (paramount, Trilogy etc) look interesting too.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 18, 2015, 08:32:42 AM
Insiders have roughly 8 weeks between each quarter-end when they are not restricted. If there is a significant event being discussed, the restriction remains until the transaction is either announced, or there is a public announcement otherwise. There were two insider purchases made during the last unrestricted period; in the current period there have been none.

It is a speculation that there have been no further buys, because the restriction has not been lifted. Our own thoughts are that they may have entered into a conditional MOU sale late in June, that executes in 2H2015. Until it executes, the restriction remains in effect. There have been at least 5 independent indications that they may well have a significant sale in progress.
 
SD
Title: Re: PWE - Penn West Petroleum
Post by: frommi on August 18, 2015, 09:09:36 AM

It is a speculation that there have been no further buys, because the restriction has not been lifted. Our own thoughts are that they may have entered into a conditional MOU sale late in June, that executes in 2H2015. Until it executes, the restriction remains in effect. There have been at least 5 independent indications that they may well have a significant sale in progress.

Is hope a new investment strategy?
Title: Re: PWE - Penn West Petroleum
Post by: SmallCap on August 18, 2015, 10:58:38 AM
Is hope a new investment strategy?

Chapter 7 of the intelligent investor, didn't you read it :)
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 18, 2015, 11:52:06 AM
It is a two step strategy, first you imagine your stake going up 25 times and second thing you do is get pissed off when it then goes to zero.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on August 18, 2015, 10:30:41 PM
Hi, Guys:

PWE used to be a 5% position in my portfolio, now it's a 1.5% position
let's say I finally surrender and try to avoid the BK risk, but I still want to keep the same exposure to oil, what's your suggestion of the new position to switch to?
I want a name that's either listed on NYSE or NASDAQ
Mega oil is not a choice b/c I want to:
1) big enough upside when oil price recovers (may not be sth like 10x but should be 2x-3x plus)
2) don't have the risk of going under

Any idea?
Thanks!

It is a two step strategy, first you imagine your stake going up 25 times and second thing you do is get pissed off when it then goes to zero.
Title: Re: PWE - Penn West Petroleum
Post by: Green King on August 18, 2015, 10:50:43 PM
Hi, Guys:

PWE used to be a 5% position in my portfolio, now it's a 1.5% position
let's say I finally surrender and try to avoid the BK risk, but I still want to keep the same exposure to oil, what's your suggestion of the new position to switch to?
I want a name that's either listed on NYSE or NASDAQ
Mega oil is not a choice b/c I want to:
1) big enough upside when oil price recovers (may not be sth like 10x but should be 2x-3x plus)
2) don't have the risk of going under

Any idea?
Thanks!

It is a two step strategy, first you imagine your stake going up 25 times and second thing you do is get pissed off when it then goes to zero.

get one of the oil trusts.
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 18, 2015, 11:12:48 PM
Hi, Guys:

PWE used to be a 5% position in my portfolio, now it's a 1.5% position
let's say I finally surrender and try to avoid the BK risk, but I still want to keep the same exposure to oil, what's your suggestion of the new position to switch to?
I want a name that's either listed on NYSE or NASDAQ
Mega oil is not a choice b/c I want to:
1) big enough upside when oil price recovers (may not be sth like 10x but should be 2x-3x plus)
2) don't have the risk of going under

Any idea?
Thanks!

I don't think there are any names that will match your 2 conditions. To meet number 1, the company has to be highly levered to the price of oil - so a higher cost producer. Therefore it cannot meet the second condition. All of those companies are at risk of going bankrupt if oil prices stay depressed for long periods of time.
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 18, 2015, 11:45:24 PM

Second level thinking followed by third level confirmation bias is a dangerous thing.
huh?
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 19, 2015, 09:34:28 AM
Hi, Guys:

PWE used to be a 5% position in my portfolio, now it's a 1.5% position
let's say I finally surrender and try to avoid the BK risk, but I still want to keep the same exposure to oil, what's your suggestion of the new position to switch to?
I want a name that's either listed on NYSE or NASDAQ
Mega oil is not a choice b/c I want to:
1) big enough upside when oil price recovers (may not be sth like 10x but should be 2x-3x plus)
2) don't have the risk of going under

Any idea?
Thanks!

It is a two step strategy, first you imagine your stake going up 25 times and second thing you do is get pissed off when it then goes to zero.
Make a bucket of the highest quality assets, CHK TET are interesting. Costs are coming down there and management is very good.
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on August 19, 2015, 12:23:04 PM
Hi, Guys:

PWE used to be a 5% position in my portfolio, now it's a 1.5% position
let's say I finally surrender and try to avoid the BK risk, but I still want to keep the same exposure to oil, what's your suggestion of the new position to switch to?
I want a name that's either listed on NYSE or NASDAQ
Mega oil is not a choice b/c I want to:
1) big enough upside when oil price recovers (may not be sth like 10x but should be 2x-3x plus)
2) don't have the risk of going under

Could you mix and match to get the exposure you want? IE buy XOM and use the dividends to buy LEAPs on something junkier with higher potential upside?
Any idea?
Thanks!

It is a two step strategy, first you imagine your stake going up 25 times and second thing you do is get pissed off when it then goes to zero.
Title: Re: PWE - Penn West Petroleum
Post by: influx on August 20, 2015, 12:07:03 AM
There have been at least 5 independent indications that they may well have a significant sale in progress.
 
SD

Can you please share these?
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 21, 2015, 09:31:18 PM
I find it hard to see how this whole thing is worth less then 2.6bn$. I saw undeveloped land assets at other companies valued at 600-800$ per acre at a lot of other companies at year end 2014 (after taking a dip already in lower oil prices). These guys have like 3 million acres of undeveloped? And then they also have tax losses, a large developed resource base.

If the other 1.4 million acres would go for a thousand per acre (given the infrastrucutre and some of it is pretty high quality), that gets you close to 2.6bn$ already.

At this point you would have to say there is a very very large chance this goes to zero to not buy some. If oil recovers this is a ten bagger. And possibly you break even if they get bought out at lower prices. Or if they get slowly liquidated. So three scenarios you get around current market value returned, you lose or you have a multibagger.

Then there is also the canadian currency advantage.

I guess nobody really knows what this company is really worth, but I doubt the market was that wrong to value this at 15$ at some point? Given that they actually ahve a sizable amount of medium cost assets and top tier management now improving their cost base.

If oil recovers this thing probably trades at 1-2x earnings.

Also page 14 is interesting
http://www.pennwest.com/investors/presentations-webcasts
IRR's of 30% at 70$ oil.

They still have credit facility of several hundred million.

I guess we will see.

Title: Re: PWE - Penn West Petroleum
Post by: rb on August 21, 2015, 10:05:16 PM
I've been looking at this for a while. There's a lot of talk of land sales. The thing is that a lot of oil cos are talking about divestures. But who are going to be the buyers of all this land? If the land can be successfully developed they would have developed it, so I don't see a smart player buying this at anything but distressed values.

Does this land have any other uses? Can you grow stuff on it?
Title: Re: PWE - Penn West Petroleum
Post by: Zorrofan on August 22, 2015, 08:50:06 AM
I've been looking at this for a while. There's a lot of talk of land sales. The thing is that a lot of oil cos are talking about divestures. But who are going to be the buyers of all this land? If the land can be successfully developed they would have developed it, so I don't see a smart player buying this at anything but distressed values.

Does this land have any other uses? Can you grow stuff on it?

FWIW I don't believe that they own the actual land, just the mineral rights or rather the right to develop them.

cheers
Zorro
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 22, 2015, 09:09:32 AM
That's what I though too but wasn't sure. If they only own the mineral rights it's even worse.

So let's go back to my original thought. Who's actually going to step up and buy these rights? And if somehow someone does come up why would they pay anything but bottom dollar?
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on August 22, 2015, 10:41:23 AM
That's what I though too but wasn't sure. If they only own the mineral rights it's even worse.

So let's go back to my original thought. Who's actually going to step up and buy these rights? And if somehow someone does come up why would they pay anything but bottom dollar?

Black spruce, balsam, some swamp grass, and turtles, to answer your 'growing' question.

No one is going to buy the land at anything other than fire sale prices.  Your question was rhetorical, right?  Oil companies, like anyone else, generally only buy when they get to pay top dollar.  Thats how PWT and other weak operators got to where they are.

The only real option Pennwest has is to make enough money at these oil/gas prices to service the debt going forward.  If oil prices go up, they will be fine.  If oil prices stay this low, they will struggle along in a permanent state of doldrums.  PWTs managers have ridden some cycles.  There are others in much worse shape that should fold more quickly.  We have been here before many times, and some survive every cycle - SU, Arx, Imperial oil, etc. 

Hardly an optimistic note, but I bought about 12000 shares this week.  I sold everything at a small loss, nearly two months ago to get clear with the tax man.  It is a pretty clear binary outcome at this point.  No options or anything that has a time limit.  And, I will even get a 3.9% yield on my shares, for now.   
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 22, 2015, 10:59:18 AM
Re: independent indications.

Take the standard mosaic approach to assessment, and many would argue it likely that a MOU had been reached regarding a potentially significant asset sale. Due diligence was likely in progress, & there was sufficient confidence in the transaction proceeding that the bare minimum level of IFRS accounting was required.
1.   Winnipeg newspaper reference.
2.   Discussions with affected employees.
3.   Subsequent transfer of an oil lease out of Pen West name.
4.   Original July presentation; additional 200M of 2H opex savings. Now removed.
5.   Q2 earnings report language; plural sales during the quarter.
6.   Mandatory IFRS accounting treatment when there is a sale.
7.   Various grumblings around loose lips.
8.   No insider buying at these low price levels.

Today’s market is very different to what it was in June. As it’s a small patch, most would expect an existing MOU to remain in place for 6 months or so – subject to a price formula using 2H data. If PWT accepts, the sale would probably go through as at June 30; if not - there may be a small break fee to cover costs. In the interim, no further IFRS disclosure is required.

Most would expect a wise CEO to also be pursuing other sale options. Our preference is an interim short/medium term royalty sale, & reinvestment in drilling to replace the sold production. When the royalty term is over, the residual production comes back.

It just stands out because of todays depressed views, it is not necessarily bullish.
We don’t think it unrealistic, but it’s not done until the fat lady sings.

SD
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 22, 2015, 11:26:55 AM
That's what I though too but wasn't sure. If they only own the mineral rights it's even worse.

So let's go back to my original thought. Who's actually going to step up and buy these rights? And if somehow someone does come up why would they pay anything but bottom dollar?
They currently produce about 35m barrels per year, and developed proved reserves are 230m barrels. So with little capex they can keep producing for like 6 years. That alone is probably worth 1.5-2bn$. Then there are about 250m undeveloped 2p and 1p reserves. They potentially have huge fields that can be break even at around 50$ per barrel that can produce 40-60k BOE (or about 15-22m per year). Those fields alone could give them a profit stream of like 2-300m$ a year at 75$ oil (if you think it will level out there).

And then there is their undeveloped land which potentially holds a couple hundred million more BOE of 1p and 2p reserves. So if you give this a per barrel value of 2$, then potentailly that is another billion $ for undeveloped land. Given that they have added over the years to their reserves, that does not seem too unlikely.

Then there are cost cuts, since this was a bureaucratic nightmare a few years ago. And what I like is that management comes from other large oil companies, they have good reputations. They have made this company more easily digestible for a oil major.

There might be larger companies that can just eliminate certain costs too. Im seeing this as a nice cheap option on oil at this point. Risky but upside too juicy to ignore. ANd the fact that it is so hated, and blindly sold off by idiot investors chasing dividends makes me more comfortable that it is mispriced too (in case the above is just a bunch of gibberish).
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on August 22, 2015, 12:02:40 PM
As you said, "If oil prices stay this low, they will struggle along in a permanent state of doldrums." I am just wondering if the oil price stays this low, or even lower, how long can they hang on there? 1 year? 2 years? assuming they can no longer sell meaningful assets at meaningful prices

That's what I though too but wasn't sure. If they only own the mineral rights it's even worse.

So let's go back to my original thought. Who's actually going to step up and buy these rights? And if somehow someone does come up why would they pay anything but bottom dollar?

Black spruce, balsam, some swamp grass, and turtles, to answer your 'growing' question.

No one is going to buy the land at anything other than fire sale prices.  Your question was rhetorical, right?  Oil companies, like anyone else, generally only buy when they get to pay top dollar.  Thats how PWT and other weak operators got to where they are.

The only real option Pennwest has is to make enough money at these oil/gas prices to service the debt going forward.  If oil prices go up, they will be fine.  If oil prices stay this low, they will struggle along in a permanent state of doldrums.  PWTs managers have ridden some cycles.  There are others in much worse shape that should fold more quickly.  We have been here before many times, and some survive every cycle - SU, Arx, Imperial oil, etc. 

Hardly an optimistic note, but I bought about 12000 shares this week.  I sold everything at a small loss, nearly two months ago to get clear with the tax man.  It is a pretty clear binary outcome at this point.  No options or anything that has a time limit.  And, I will even get a 3.9% yield on my shares, for now.
Title: Re: PWE - Penn West Petroleum
Post by: yadayada on August 22, 2015, 02:03:53 PM
Cash flows of 3-500m$ in next two year? If SD is right about sale + line of credit of like 800m$ (too lazy to check but somewhere in that area), then Id say they can survive for a few years. They have some hedges running too. Some low cost production coming online.

SD, how do you get those 200m$ cost cuts? I can't find that anywhere. You said that it was in a release that was soon deleted? That would lift cash flows to 500m$ next year if you assume similar oil prices (and similar hedges I guess).
Title: Re: PWE - Penn West Petroleum
Post by: no_free_lunch on August 22, 2015, 02:12:51 PM
I don't know where else to put this.   OPEC has complete power to change the dynamics of the oil glut and current prices are really starting to bite.   Not trying to call a bottom but it is important to remember that it is not all about true supply and demand, never has been for the past 40 years.

Quote
Economists are predicting a budget deficit of as much as 20 percent of gross domestic product and the International Monetary Fund forecasts a first Saudi current-account deficit in more than a decade. Reserves at the central bank tumbled 10 percent from a year ago, or by more than $70 billion.

http://www.bloomberg.com/news/articles/2015-08-21/how-much-longer-can-saudi-arabia-s-economy-hold-out-against-cheap-oil-
Title: Re: PWE - Penn West Petroleum
Post by: rb on August 22, 2015, 02:28:09 PM
I don't know where else to put this.   OPEC has complete power to change the dynamics of the oil glut and current prices are really starting to bite.   Not trying to call a bottom but it is important to remember that it is not all about true supply and demand, never has been for the past 40 years.

Quote
Economists are predicting a budget deficit of as much as 20 percent of gross domestic product and the International Monetary Fund forecasts a first Saudi current-account deficit in more than a decade. Reserves at the central bank tumbled 10 percent from a year ago, or by more than $70 billion.

http://www.bloomberg.com/news/articles/2015-08-21/how-much-longer-can-saudi-arabia-s-economy-hold-out-against-cheap-oil-
I think I posted something about here or some other thread. I ran the numbers and looks like if the Saudis don't cut somewhere else you get a deficit of about 10% not 20%. Reserves going down by 70% is also consistent with a 10% deficit. Btw, those aren't really reserves but more like a sovereign fund and that fund has about $700 B. The country has no debt. If they also slow down arms purchases they can lower the deficit quite a bit. So they have a lot of staying power.
Title: Re: PWE - Penn West Petroleum
Post by: no_free_lunch on August 22, 2015, 02:38:02 PM
Oil prices have been falling throughout the year so that deficit doesn't reflect current prices.   They also have a fast growing population to take care of.   I think arm's purchases are going to go up not down, middle east does not exactly seem to be cooling down.   At some point in the future they are going to have to rely on that soverign fund for their income as there is very little other exporting economy.   So right now, today, it is kind of madness to be spending the fund except for brief periods.   I think they are in a worse situation than you do.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on August 22, 2015, 03:42:17 PM
The 200M Opex saving started 2H 2015 and was in an early version of their July presentation that we downloaded. As they removed it later, they may have inadvertently disclosed more than they intended; hence we’re not republishing it.

From one of our earlier posts. Look closer at P16, & P2 (July 2015 MD&A):
Consequently, the Company is updating its funds flow from operations guidance range from $500 - $550 million to $350 - $400 million. Funds flow from operations was 151M for 1H; to get to 375M on the year, 2H flow (resulting from what they control) must be 224M. It is highly likely that the 73M difference is the July 2015 Power Point 200M of expected annual opex reduction kicking in. You do not see it this quarter, because it does not start until next quarter.

They expected full year production to remain flat, and still think that; so it must be a lot of barrels - about 2015’s new production net of depletions. The volume suggests it’s the Waskada assets, and that saved annual opex cost would be around the 150-200M mark. If the buyer is whom most would expect, a compromise price adjustment formula would also not be unreasonable.

Doesn’t mean it’s a done deal, but it does mean that the upside P(X) is probably higher than many are giving them credit for.

SD
Title: Re: PWE - Penn West Petroleum
Post by: wellmont on August 22, 2015, 06:27:05 PM
That's what I though too but wasn't sure. If they only own the mineral rights it's even worse.

So let's go back to my original thought. Who's actually going to step up and buy these rights? And if somehow someone does come up why would they pay anything but bottom dollar?
They currently produce about 35m barrels per year, and developed proved reserves are 230m barrels. So with little capex they can keep producing for like 6 years. That alone is probably worth 1.5-2bn$. Then there are about 250m undeveloped 2p and 1p reserves. They potentially have huge fields that can be break even at around 50$ per barrel that can produce 40-60k BOE (or about 15-22m per year). Those fields alone could give them a profit stream of like 2-300m$ a year at 75$ oil (if you think it will level out there).

And then there is their undeveloped land which potentially holds a couple hundred million more BOE of 1p and 2p reserves. So if you give this a per barrel value of 2$, then potentailly that is another billion $ for undeveloped land. Given that they have added over the years to their reserves, that does not seem too unlikely.

Then there are cost cuts, since this was a bureaucratic nightmare a few years ago. And what I like is that management comes from other large oil companies, they have good reputations. They have made this company more easily digestible for a oil major.

There might be larger companies that can just eliminate certain costs too. Im seeing this as a nice cheap option on oil at this point. Risky but upside too juicy to ignore. ANd the fact that it is so hated, and blindly sold off by idiot investors chasing dividends makes me more comfortable that it is mispriced too (in case the above is just a bunch of gibberish).
those millions of acres are worth nothing in this price environment. lots of companies have acreage. take a look at POU on toronto. tons and tons of acreage. non of it viable at anywhere near these prices. prices would have to get north of $80 for these acres to be close to viable and even then it depends on somebody buying it as a speculation. only thing that will change hands these days is property that is producing in a low price environment. putting those acrese in the valuation of pwt is aggressive. pwe sells at a fraction of it's stated book value because the market has decided that land has no value. why invest in undeveloped land when you can buy producing oil companies on the stock market at fractions of their book value?
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on August 24, 2015, 10:23:07 AM
I sold this thing after a 25% loss, and now it's fallen another 2/3 since then.  It's a reverse multi-bagger (well, not really), given that I got more than 3x the current price.

Uhhgg...  what an experience for my first oil stock of any significance.

I'm not particularly game to try again either.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on August 24, 2015, 11:09:18 AM
Ericopoly, you are a smart man.

I would like to know when you sold your Penn West shares and what was your thought process at the time that made you sell?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: gary17 on August 24, 2015, 11:38:55 AM
Fwiw I sold my shares about an hour after I bought.  I realized if I needed to ask all my contacts in OandG to explain to me how this works I don't know this enough to own lol

Good luck to all
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on August 24, 2015, 11:42:27 AM
Ericopoly, you are a smart man.

I would like to know when you sold your Penn West shares and what was your thought process at the time that made you sell?

Cardboard

I had bought it in early December near $3 -- about 2% of net worth position.  That was going to be my great speculation stock for the year because if oil prices had rebounded in 6 months or so as some people thought entirely possible, then it might have been a nice booster.

But the stock kept dropping and it went a bit below $1.50 in late January -- then on the first rally back up I sold it around $2.25 in February.  It then kept going up and for a while I felt stupid because it nearly went back all the way to my purchase price (of course that was eating at me).  But I never bought back in again after it then started dropping again.

It was purchased in the first place as a small speculative position.  Even so, small or not, once it was losing money I just wasn't interested anymore and was happy to part with it -- so typical!  Hah. 

About as shrewd as Forrest Gump.
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on August 24, 2015, 12:08:42 PM
Hi Eric

Why did you reenter PWE :)?

Thanks
Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on August 24, 2015, 12:15:57 PM
Hi Eric

Why did you reenter PWE :)?

Thanks

I didn't.  I wrote:

"I'm not particularly game to try again either."
Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on August 24, 2015, 02:37:21 PM
Thanks for Clarification
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on August 24, 2015, 07:40:22 PM
Wow - is this the max repulsion for energy stocks - been about a 11 or 12 year bear market now for most of these equities. Oil is the most important commodity in the world yet the mainstream media & the public hate it. 90+% of investors do not want to hear or think about it. This may tell you something about what may happen in the next 2 or 3 years.


Title: Re: PWE - Penn West Petroleum
Post by: Liberty on August 25, 2015, 09:04:40 AM
Wow - is this the max repulsion for energy stocks - been about a 11 or 12 year bear market now for most of these equities. Oil is the most important commodity in the world yet the mainstream media & the public hate it. 90+% of investors do not want to hear or think about it. This may tell you something about what may happen in the next 2 or 3 years.

Something being an important commodity doesn't mean that the companies operating in that industry will make any money. Oil was more important per unit of GDP in the 80s and 90s yet prices were low for years and years...
Title: Re: PWE - Penn West Petroleum
Post by: Granitepost on September 01, 2015, 03:46:53 AM
Oil producer Penn West to cut jobs suspend dividend Sept 1 2015

Canadian oil and gas producer Penn West Petroleum Ltd said it would lay off about 35 percent of its workforce and suspended its dividend as it copes with a slump in crude oil prices.
The company also lowered its 2015 capital spending forecast by 13 percent to C$500 million.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 01, 2015, 06:13:29 AM
Very, very good announcement.
http://pennwest.mediaroom.com/index.php?s=27585&item=135255

SD
Title: Re: PWE - Penn West Petroleum
Post by: constala on September 01, 2015, 06:58:00 AM
Very, very good announcement.
http://pennwest.mediaroom.com/index.php?s=27585&item=135255

SD
why so  good? no asset sales here.Sure, there is  at  last a  captain at the helm: but annual savings are just div 1c=20m+job cuts (35% worforce)45m; and as one-off, capex down 75m+fx hedge monetizing 75m . Not quite enough to change course or am I missing something?

Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 01, 2015, 08:21:03 AM
IMO, there is an asset sale: Spearfish/Waskada in Manitoba, but for some reasons it is not reported yet.

The asset is not listed in the non-core assets on the presentation and the change in production guidance is too large to be explained just by a reduction in capex for what is left of H2 vs decline rates.

Regarding savings; the dividend elimination, employee reduction and others is $100 million a year per the conference call. That is pretty significant based on current fund flows and could be considered permanent. I think it can be based on their overall G&A/boe vs others. It will give them breathing room to continue funding capex and meet their debt covenants.

Cashing in the forex now makes sense IMO. Everyone including mom and pop now knows that China is slowing down and that commodities are untouchable as investments. So, I think that the drop in the CAD$ vs the USD is pretty much over.

The presentation gives a crystal clear thesis as to why invest in PWT now and it is on the Core Assets page.

You have 54,000 boe/d with 76% liquids in 3 low costs areas and all profitable today. Very respectable Opex and netbacks. And low risk drilling locations. If you are to assign a very low multiple of $60,000 per boe/day, that is $3.24 billion. Substract the debt of $2.1 billion and divide by 500 million shares and you get $2.28 per share.

This is an incredibly low valuation to take-out some of the best acreage in Canada and NA (Viking and Cardium) and gives zero value for all other non-core assets and we are talking about 34,000 boe/day with some being pretty valuable. Zero value for the Duvernay.

Cardboard   
Title: Re: PWE - Penn West Petroleum
Post by: redwood on September 02, 2015, 10:35:11 AM
from Merrill  "we anticipate PWT will trip debt covenants in Q316 "

"Suspends dividend; cuts costs; trips covenant Q3 16
PWT announced several cost initiatives as it battles debt concerns and ongoing
commodity price weakness. 1) it will suspend its dividend following the October
payment (was $0.01/sh per quarter) resulting in $20mn in annual savings, 2) it is
reducing its FY15 budget to $500mn (was $575) resulting in lower FY15 production
guidance of 86-90 mboe/d (was 90-100) and opex of $19.25-$19.75/boe; 3) workforce
reductions of 35% (400 people) saving $45mn annually and 4) reducing Board comp.
We update our model accordingly, including incremental hedging, higher per boe
operating costs and lower production levels on reduced spending. FY15 CFPS falls to
$0.46/sh (was $0.55) on production of 88 mboe/d (was 90). FY16 CFPS drops to $0.53
(was $0.64) on production of 74 mboe/d (was 83) and spending of just $250mn (cash
flow is $265mn) and capital efficiency of $27k/boe/d. Our estimates do not include
asset sales but do include a one-time possible FX hedging monetization for $75mn in
Q315 (for EBITDA debt calculation, but not cash flow). Including the FX hedge
monetization, we anticipate PWT will trip debt covenants in Q316 (was Q1) with debt to
trailing EBITDA of 4.8x (allowable 4.5x), based on our US$53/bbl WTI (and in line with
today’s future strip price of US$51/bbl)."
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on September 02, 2015, 11:18:13 AM
Quote
...Our estimates do not include asset sales...

I can create estimates where they trip convenants and don't trip convenants, and buy Disney World
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 02, 2015, 12:17:09 PM
Quote
...Our estimates do not include asset sales...

I can create estimates where they trip convenants and don't trip convenants, and buy Disney World

Thanks Merrill for such amateurish reports, this is providing opportunity!  8)
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 03, 2015, 06:58:27 AM
IMO, there is an asset sale: Spearfish/Waskada in Manitoba, but for some reasons it is not reported yet. 

in the latest conference call, non core assets for disposition are:
Mitsue
Weyburn
Swan Hills
NЕ BC & NW AB
East Central AB
PROP
Other

Total: 34,000boe/d production

Which one do you refer to?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 03, 2015, 09:00:47 AM
That is what I meant. It is not listed on that list nor on the core assets, so where is it?

Why has the mid-point of production forecast declined by 7,000 boe/day on Sept 1 or with only 4 months left in the year? Reduction in capex alone? Unforeseen problems in the fields? Shut-ins?

Simply does not add up.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: FB on September 03, 2015, 10:42:27 AM
IMO, there is an asset sale: Spearfish/Waskada in Manitoba, but for some reasons it is not reported yet.

The asset is not listed in the non-core assets on the presentation and the change in production guidance is too large to be explained just by a reduction in capex for what is left of H2 vs decline rates.

Cardboard   

Hi, fairly new to that one: I can't see any reference to the spearfish / waskada assets in any of the reports over the past 2 years. I can see however a significant write down in Manitoba in the 2013 restated report for "lower estimated reserve recoveries in Manitoba" ; could spearfish / waskada have been written down and be included in the "other" category of non core assets in their recent release?
They might not be in a position to disclose an on going sale for various reasons but in that case I would think that the asset should still be in their reports. Removing it does not make sense (or is an amateurish mistake from a disclosure standpoint)
thanks,
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 03, 2015, 12:29:29 PM
You are right, it is tough to find details on it but, they definitely still own it:

http://www.pipelinenews.ca/features/drilling-exploration/manitoba-expects-significant-decline-in-activity-1.1953491

https://globenewswire.com/news-release/2014/12/11/690628/10112050/en/TUNDRA-OIL-GAS-LIMITED-ACQUIRES-7-000-BARRELS-OF-ADDITIONAL-MANITOBA-OIL-PRODUCTION.html?print=1

Also, it shows in the Annual Information Form that they have 458 net producing oil wells in Manitoba out of 7,047. I have no idea where these wells stand in their life (decline curve) and productivity vs the rest but, out of 63,222 boe/d produced of liquids in Q2, it would mean proportionally 4,100 boe/day.

It could be less of course since they have not deployed capital out there in a while but, EOG was producing 7,000 boe/d in that area from 550 wells and PWT is considered the other big guy.

In any case, it is more than 1,000 boe/d or the total for the Other Non-core asset category in the presentation. By the way, there is no legal or prescribed form to make a public presentation unlike financial statements.

Why the analysts didn't ask about that on the call or the quite large reduction in forecasted production is quite telling IMO on how much they know about the company or said differently, how little interest they have left.

Cardboard 
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on September 03, 2015, 12:49:12 PM
I just wrote investor relations asking (basically plagiarized FB's comment) above. Hopefully I'll hear back, and I'll post the response.
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 04, 2015, 12:56:19 AM
I just wrote investor relations asking (basically plagiarized FB's comment) above. Hopefully I'll hear back, and I'll post the response.

I was going to propose that. Thanks. Please share!
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 04, 2015, 12:58:19 AM
You are right, it is tough to find details on it but, they definitely still own it:

http://www.pipelinenews.ca/features/drilling-exploration/manitoba-expects-significant-decline-in-activity-1.1953491

https://globenewswire.com/news-release/2014/12/11/690628/10112050/en/TUNDRA-OIL-GAS-LIMITED-ACQUIRES-7-000-BARRELS-OF-ADDITIONAL-MANITOBA-OIL-PRODUCTION.html?print=1

Also, it shows in the Annual Information Form that they have 458 net producing oil wells in Manitoba out of 7,047. I have no idea where these wells stand in their life (decline curve) and productivity vs the rest but, out of 63,222 boe/d produced of liquids in Q2, it would mean proportionally 4,100 boe/day.

It could be less of course since they have not deployed capital out there in a while but, EOG was producing 7,000 boe/d in that area from 550 wells and PWT is considered the other big guy.

In any case, it is more than 1,000 boe/d or the total for the Other Non-core asset category in the presentation. By the way, there is no legal or prescribed form to make a public presentation unlike financial statements.

Why the analysts didn't ask about that on the call or the quite large reduction in forecasted production is quite telling IMO on how much they know about the company or said differently, how little interest they have left.

Cardboard

It makes me wonder why you havent asked PW's IR instead of wondering ? :)
Or maybe you did :)


Thanks for the discussion so far.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 04, 2015, 03:27:49 AM
I did ask them a few questions before. And they have answered with useless responses. I hope that they are part of the 400 being cut from their fat G&A.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 09, 2015, 01:32:29 PM
While it is very tough to remain optimistic, look at the latest deal made by Crew Energy:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCR-2309942&symbol=CR&region=C

That is $222,222 per boe per day. For heavy oil!!!
And $50 per boe of 2P reserves

I am not sure what is on the undeveloped acreage that they are leaving to the buyer but, keep in mind that it is undeveloped, not producing and still heavy oil. So assets still sell at pretty high prices.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on September 09, 2015, 07:59:30 PM
While it is very tough to remain optimistic, look at the latest deal made by Crew Energy:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCR-2309942&symbol=CR&region=C

That is $222,222 per boe per day. For heavy oil!!!
And $50 per boe of 2P reserves

I am not sure what is on the undeveloped acreage that they are leaving to the buyer but, keep in mind that it is undeveloped, not producing and still heavy oil. So assets still sell at pretty high prices.
Cardboard

Must be some sort of Social Media company sitting on that acreage given the valuation which was paid :o :o :o. Now i gotta know who bought this?
Title: Re: PWE - Penn West Petroleum
Post by: rb on September 09, 2015, 08:16:14 PM
Must be some sort of Social Media company sitting on that acreage given the valuation which was paid :o :o :o. Now i gotta know who bought this?
So you could short it?
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on September 09, 2015, 08:26:14 PM
Must be some sort of Social Media company sitting on that acreage given the valuation which was paid :o :o :o. Now i gotta know who bought this?
So you could short it?

Ask them what the hell they're thinking. There's probably land sales/companies aval for 5% to 10% of that flowing bbl valuation in this market.
Title: Re: PWE - Penn West Petroleum
Post by: bizaro86 on September 10, 2015, 03:37:34 PM
While it is very tough to remain optimistic, look at the latest deal made by Crew Energy:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCR-2309942&symbol=CR&region=C

That is $222,222 per boe per day. For heavy oil!!!
And $50 per boe of 2P reserves

I am not sure what is on the undeveloped acreage that they are leaving to the buyer but, keep in mind that it is undeveloped, not producing and still heavy oil. So assets still sell at pretty high prices.

Cardboard

I wouldn't be surprised if the crew assets have a bunch of wells that are shut-in that could be re-activated. That is not uncommon in heavy oil deals, and would make the metrics look much better. Otherwise they got an unbelievably good price.
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 15, 2015, 12:00:00 AM
While it is very tough to remain optimistic,

Why? Has anything changed based on your earlier assessment? Or is it in your mind only? Just wondering, maybe this is maximum pessimism :)
I see First Eagle are still holders of PWE as of June 30th with nearly 5%
http://www.nasdaq.com/symbol/pwe/institutional-holdings

I dont know who Key Group are, I'll try to find more. They have increased nearly 5 million shares (~1% of outstanding). It will be interesting to see as of Sep. 30th.

BTW, some recent articles:
https://rbcnew.bluematrix.com/docs/pdf/8821abfb-dc1a-44be-9ac3-d6239c53fa1d.pdf?
There was one more from Morning Star I think and I cannot find it now.

I am still holding dry powder and contemplating of entering this one big. At least 10-20 % of portfolio
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 15, 2015, 05:33:12 AM
http://pennwest.mediaroom.com/index.php?s=27585&item=135257

Penn West announces sale of Mitsue properties for $192.5 million
Sep 15, 2015
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 15, 2015, 05:38:25 AM
While it is very tough to remain optimistic,

Why? Has anything changed based on your earlier assessment? Or is it in your mind only? Just wondering, maybe this is maximum pessimism :)
I see First Eagle are still holders of PWE as of June 30th with nearly 5%
http://www.nasdaq.com/symbol/pwe/institutional-holdings

I dont know who Key Group are, I'll try to find more. They have increased nearly 5 million shares (~1% of outstanding). It will be interesting to see as of Sep. 30th.

BTW, some recent articles:
https://rbcnew.bluematrix.com/docs/pdf/8821abfb-dc1a-44be-9ac3-d6239c53fa1d.pdf?
There was one more from Morning Star I think and I cannot find it now.

I am still holding dry powder and contemplating of entering this one big. At least 10-20 % of portfolio

of course brokerage houses are generally bull biased and here is RBC relation to PWE, "RBC Capital Markets acted as our exclusive financial advisor on this disposition." from the latest news
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 15, 2015, 06:10:44 AM
"Why? Has anything changed based on your earlier assessment? Or is it in your mind only? Just wondering, maybe this is maximum pessimism :)"

Well, I certainly didn`t expect this double dip in oil prices that has started in early July following fundamentals that were and still are improving. Going into the high $40`s due to unproven decline in China demand, ok. Going below $40 and sticking for a long time in the low $40`s, no.

Q3 results are going to be terrible for most E&P`s and Penny West in particular. This is not good for the Debt to trailing EBITDA covenants which I highly doubt the banks will relax any more.

Another concern is the current marketability for assets which is crucial for Penny West if oil is to remain low for longer. Although, they have obtained a pretty good deal here IMO: price per boe/d is quite good considering the horrible opex cost.

The banks and notes holders will also be pretty happy to see that they are almost done with their $650 million asset sale commitment 1 1/2 year ahead of time. What is likely now is that they will ask for some more in future talks.

I think it will also prove to doubters why insider buying has been nil since May with the end of Q2 reporting and this deal. Unfortunately (or fortunately), I also think that a Spearfish/Waskada deal is in the works and there have been a few rumours about Weyburn which if true would keep insiders under blackout.

Now my remaining concern is about hedging. Back in the late 90`s, the banks were great at forcing gold miners into hedging programs at $250 to $300 an ounce that prevented them from benefiting from the eventual rise in the gold price. Penny West has already hedges in place at low prices ($50) for 20% of production and I hope that they won`t go crazy and hedge a lot more at these crazy levels or rush into hedging as soon as prices hit $60.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on September 15, 2015, 07:45:07 AM
Post from Nawar on the Mitsue sale...

http://www.investorvillage.com/groups.asp?mb=19160&mn=130&pt=msg&mid=15294186

Penn West announces sale of Mitsue properties for $192.5 million

  I am very glad to see this transaction, relative to where we are trading this translation is accretive on all metrics. Penn West was getting zero credit for its non-core assets, and when I say zero I mean literally zero, at $2.6B EV you can argue that the core was valued at $48K per flowing ($2.6B/54K) and all the rest was worth !$0. Most importantly as they continue to divest non-core assets the company will reduce debt, improve its operating metrics and will increasingly be valued on its core assets, which are vastly more valuable.
 
I have valued the following non-core asset base at $1B to $1.2B or roughly at $32.3K per flowing:
 
Swan Hills
NE BC & NW AB
East Central AB
Mitsue
PROP
Weyburn
Other   8,000 boe/d
8,000 boe/d
7,000 boe/d
4,500 boe/d
3,000 boe/d
2,500 boe/d
1,000 boe/d   76%
8%
41%
78%
97%
100%
55%
Total Non-Core (1)   34,000 boe/d   56%
 
This transaction was done at a higher multiple then what I have projected, which greatly enhances their chances of raising at least $1B from these assets sales in the next 12 months. The next asset to go will likely be Weyburn, and this asset is worth $200m to $250m, hence at mid-point Mitsue and Weyburn would net them $417m. If we round down to $400m those assets would reduce debt from $2.2B to $1.8B and still leave them with 27K barrels to divest.Those are declining assets so the faster they divest them the better, however with better oil price outlook in 2016 this could be an offsetting factor. At conservative multiples ranging from $22K per flowing to $30K per flowing they would raise $600m to $800m from those assets, thus raising $1B to $1.2B in total from their non-core assets sales. At midpoint those assets would reduce their debt to $1.1B, while still leaving them with potentially valuable non-core acreage such as the Duvernay (below the Cardium) which would ultimately bring down their debt to below $1B.
 
As I highlighted before the emerging Penn West core will be very comparable to Whitecap. Whitecap is carrying around $800m in debt with 40K barrels in mostly Viking and the Cardium production. Penn West core would carry $1.1B in debt with 54K barrels in mostly Viking and Cardium production, thus both companies would carry 20K in debt per barrel. Whitecap is valued at $100K per flowing, however Whitecap is hedged |(albeit less so going forward) and has slightly lower operating costs, thus if Penn West core is to be valued at $80K per flowing by 2017, the resulting entity would be worth $6.4 per share and probably be worth more if they opt for a transaction at that point.
 
I will continue to pressure the management/bored to divest non-core assets and further focus the company around the core, this is a double win strategy for shareholders as divesting the non-core reduces debt (and thus reduces covenant violation risk) while it helps unlock the value of the company core asset base. Granted if they would have divested more aggressively in 2013 to 2014, they could have probably raised an additional $500m from the non-core, but better late then never, we have no choice but transact in a low oil price enviroment at this point.
 
Regards,
Nawar
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 15, 2015, 08:03:06 AM
Looks like Cardinal Energy was the buyer along with a private company

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aCJ-2311175&symbol=CJ&region=C

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 15, 2015, 10:45:12 AM
The asset sale is a big positive. On current flowing boe/d multiples, PWE could be worth $1.16 from current prices.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on September 15, 2015, 12:59:16 PM
yet the market just ignores (almost) - it still looks like on its road to zero

The asset sale is a big positive. On current flowing boe/d multiples, PWE could be worth $1.16 from current prices.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 15, 2015, 01:25:51 PM
"The asset sale is a big positive. On current flowing boe/d multiples, PWE could be worth $1.16 from current prices."

Care to elaborate on how you are doing your math???

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 15, 2015, 05:05:02 PM
I am really sorry, i made an excel booboo when I calculated implied share value. I'm actually getting 0.62 per share versus 1.16.

Current implied per flowing boe/d is $29k boe/d USD.

PWE has pre divestiture production of 91,164 boe/d.

Implied boe/d of $29,058.84.

Asset sale of C$43,000 or $32,452 USD.

$32,453 x 91,164 = 2.958 billion versus current enterprise value of 2.649 billion.

The difference divided by 502 million shares gets you .62.

Title: Re: PWE - Penn West Petroleum
Post by: constala on September 16, 2015, 02:39:33 AM
@Wilson-TPC, $32k boe/d may be right for non core assets; with a range of lets stay 28k-40k; but for Core Assets you should use a higher number, as netback are much higher strategic value etc...probably up to $60k boe/d...I do no think it is appropriate to a single blended rate based on a fairly distressed non-core assets sale to assess the whole PWE boe/d.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 16, 2015, 07:17:34 AM
Wilson, I am confused by what your saying in regards to the asset sale.  Are you suggesting the value of the company has dropped by 0.62 due to the asset sale. 

If I apply $50,0000 boe/day to existing production (just a number - no particular rationale behind it) and multiply that by 90000 boe/day production I get a fairly conservative asset value per share of
$9.00/ share.  I am assuming these asset sales will not have much effect on actual production - they can just add production in their core areas. 

In general, they seem to be on the right track.  A rise in oil prices to 55 US would ensure their survival.  I have bought back in recently after a tax wash sale.  About 40000 shares all told.  I will stop at this point.  The possibility of Creditor protection is still very real. 

Funny that Nawar mentions Whitecap.  I have a larger position in WCP than PWT.  WCP is actually doing okay under the existing price regimen.  As he mentions they are hedged (for now) and generating enough cash to meet their obligations.

The final nail in the low price coffin is coming this quarter as higher priced hedges come off - speaking of the Non-sovereign industry in general.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 16, 2015, 07:28:20 AM
Another easy way to value PWT is to take 192M * 90000/4500 ~ 8 per share minus $4.00 per share debt = $4.00 per share. 

In my prior post I forgot the debt - including debt would give you $5.00/share. 

Taking out all the debt is not realistic since all these assets use debt to operate but it sort of puts a floor on the asset value of each share barring bad luck which lands them in creditor protection.  The creditors would make out like bandits at the moment, except they dont want the assets. 
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 16, 2015, 11:32:11 AM
You think Penn West can get 50k per flowing in US Dollars in this kind of environment?

Can you name any other transactions that's even remotely close to these multiples?

The non-core asset sale was 43k in Canadian, so 32k US. The whole company today trades around 29k per flowing in US.

I'm just trying to understand where the optimism comes from.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 16, 2015, 01:44:45 PM
You do good math on BXE and I like and own that company too but, on PWT it is a different story...

Net debt is now around $1.96 billion CAD with this latest sale (and yes it has been adjusted for the exchange rate moving higher since June 30 and them selling their FX hedging gains).

Flowing boe/day is now around 83,500 with this latest sale

There are 502 million shares.

Stock is at $0.72 CAD

So current Enterprise Value is $362 million plus $1,960 million or $2,322 million CAD.

That gives an EV/boe/d of $27,800 CAD.

There are dozens upon dozens of recent deals done at higher multiples than that. They are mostly companies consolidating a play.

As Penn West continues selling non-core assets, it becomes less and less distressed meaning that bargaining power goes up. Operating costs are also heading down fast. Nawar was also right saying that this deal was accretive since EV/boe/d came down since they have done it.

Can I try to understand where your pessimism comes from?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 17, 2015, 02:01:10 AM
Have you calculated the capital efficiency of PWE?

Looking at current capex, it looks to be around C$28,000 flowing boe/d.

This is why I'm having a hard time getting my head around Penn West. I attached the screenshot.

Flowing boe/d metric is measured on several things:

1. Operating cost
2. Capital efficiency
3. IP90
4. Reserve potential
5. Production breakdown (oil and gas %)
6. Infrastructure in place
7. Comparable deals elsewhere.

If Penn West can sell a non-core asset for C$43K flowing boe/d. What would the Cardium go for? If Cardium goes for whatever, then what would the companies operating in that region be worth?

I would like an exact answer on capital efficiency and all those things I mentioned, the 7 points.   
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 17, 2015, 04:03:25 AM
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 
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 17, 2015, 07:30:20 AM
"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)"

There is not a single E&P company cheaper than PWT other than for some juniors. You guys are comparing a company that produces 70% liquids (PWT) with one that produces 70% natural gas. These normally don`t trade at the same EV/boe/d or EV/boe of reserves due to oil being much more profitable (especially light). So, the price of PWT is much lower than BXE with them currently selling at about the same EV/boe/d.

Bellatrix Cardium assets are comparable to the average quality of PWT Cardium assets (not the better ones) and I would say below. Bellatrix had some weak assets in the Cardium and with the trend to move to liquids over the last few years, they bought Angle Energy (was the 2nd largest holder in the Cardium behind PWT if I recall well) which had assets adjacent to them in the Cardium to create efficiency of scale. This is not cream of the crop but, all right.

On the other hand, BXE has a terrific asset with Spirit River giving it Returns on Capital Employed similar to Peyto and close to Southwestern. This asset, current price and Orange Capital are key reasons why I have money now in Bellatrix. Orange is very important since Raymond Smith has not demonstrated solid capital allocation (note: I had a substantial position in Angle because it was very cheap and kept most BXE shares on the take-over exchange continuing making good money until Smith issued shares in May 2014 for no reason. It was actually his eventual saving grace without him having a clue about it. Also, very glad it made me get out!)

I do not know enough about Gear or RMP to make comments but, Bonavista is another 70% gas producer. It is cheap too and can be compared to BXE. Between the two I have chosen to put my money into BXE.

Getting back to PWT, this remains a sum of the part with improving core operations. You have in it a hidden Raging River in the Viking and a Whitecap in the Cardium. And they have lots of optionality with many holdings. Operating costs are showing dramatic improvements and as they liquidate more and more non-core assets, this only gets better. Recent slashing of 35% of employees with most at HQ certainly shows attention to reducing costs. Remember this was a fat and mismanaged organization. It takes time to change the culture but, these tough times are allowing for this to happen.

Is there risk of permanent capital loss? Absolutely. If oil remains at $50 or below for a year or two, that is a big problem. However, I would say that it is a big risk for most NA producers. Many are hiding now with their hedges or lower debt levels but, they still make no money at these prices and will show declining production if these conditions persist.

Cardboard 
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 17, 2015, 07:53:19 AM
My measure of profitability is net back not whether they produce oil or gas.  I also adjust production to reflect a 15:1 oil to gas price and even here PWE is more expensive than any of the firms I mentioned.  I think there is an advantage to being a junior here as you can focus your resources on high return formations versus spreading your bets around.  IMO the spreading your bets approach will be hurt in this O&G environment.  It works great when prices are rising but not in a declining or flat environment.  If O&G prices go up then PWE will rise more than the other firms I mentioned but I am not making that bet.  The other firms will do well if prices stay put and get some upside if prices rise.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on September 17, 2015, 08:33:47 AM
if a company goes to zero it is not cheap at any price

"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)"

There is not a single E&P company cheaper than PWT other than for some juniors. You guys are comparing a company that produces 70% liquids (PWT) with one that produces 70% natural gas. These normally don`t trade at the same EV/boe/d or EV/boe of reserves due to oil being much more profitable (especially light). So, the price of PWT is much lower than BXE with them currently selling at about the same EV/boe/d.

Bellatrix Cardium assets are comparable to the average quality of PWT Cardium assets (not the better ones) and I would say below. Bellatrix had some weak assets in the Cardium and with the trend to move to liquids over the last few years, they bought Angle Energy (was the 2nd largest holder in the Cardium behind PWT if I recall well) which had assets adjacent to them in the Cardium to create efficiency of scale. This is not cream of the crop but, all right.

On the other hand, BXE has a terrific asset with Spirit River giving it Returns on Capital Employed similar to Peyto and close to Southwestern. This asset, current price and Orange Capital are key reasons why I have money now in Bellatrix. Orange is very important since Raymond Smith has not demonstrated solid capital allocation (note: I had a substantial position in Angle because it was very cheap and kept most BXE shares on the take-over exchange continuing making good money until Smith issued shares in May 2014 for no reason. It was actually his eventual saving grace without him having a clue about it. Also, very glad it made me get out!)

I do not know enough about Gear or RMP to make comments but, Bonavista is another 70% gas producer. It is cheap too and can be compared to BXE. Between the two I have chosen to put my money into BXE.

Getting back to PWT, this remains a sum of the part with improving core operations. You have in it a hidden Raging River in the Viking and a Whitecap in the Cardium. And they have lots of optionality with many holdings. Operating costs are showing dramatic improvements and as they liquidate more and more non-core assets, this only gets better. Recent slashing of 35% of employees with most at HQ certainly shows attention to reducing costs. Remember this was a fat and mismanaged organization. It takes time to change the culture but, these tough times are allowing for this to happen.

Is there risk of permanent capital loss? Absolutely. If oil remains at $50 or below for a year or two, that is a big problem. However, I would say that it is a big risk for most NA producers. Many are hiding now with their hedges or lower debt levels but, they still make no money at these prices and will show declining production if these conditions persist.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 17, 2015, 09:32:39 AM
if a company goes to zero it is not cheap at any price

What do you think is the probability of it going to zero? How long would that take?

Given the uncertainty in oil prices, would you risk 10-percent of your portfolio, with a 50-percent chance of zero and 50-percent chance of multiplying your 10-percent position by 8X? Put another way, if crude settles at $75 in 12 months, PWE might be worth $4+. And if crude is generally higher than today, the stock-to-zero-risk falls in an exponential fashion.

Without the probability estimates, we can't easily assess the risk.

If anyone has oil price/stock price, etc. estimates, that might allow a more fine-tuning of the valuation.

Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 17, 2015, 09:53:50 AM
I think one needs to figure out the exact capital efficiency. Like I said, that's really the key here. This number determines your cash flow in essence. Penn West looks to have a really shitty capital efficiency number given the amount of capex needed just to keep productions flat. I haven't reached out to IR, but if someone knows the number, please tell me. Penn West tells shareholders absolutely nothing in those slides. Useless slides imo.

I suggested to Steve at BXE to include the decline curve and capital efficiency figures. I said, "How can shareholders value you if you don't disclose these two metrics?"

Penn West discloses only decline for core assets, but not for non-core. That's not cool. Shareholders have the right to know.
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on September 17, 2015, 10:09:59 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 17, 2015, 10:21:39 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?
Title: Re: PWE - Penn West Petroleum
Post by: Picasso on September 17, 2015, 10:29:47 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

Maybe it should never have been at $75 when every producer and their uncle was able to make the economics work, much less $100.  The best operators are the diversified and low cost ones because this always freaking happens with every commodity.  Who knows where the mean reversion price is up or down.  I don't see how anyone gets these odds right because not only do you need the price to go up, but you need the price to average $75 or whatever for years.  A quick jump in crude doesn't suddenly make the total discounted cash flows much more valuable.
Title: Re: PWE - Penn West Petroleum
Post by: Green King on September 17, 2015, 10:30:35 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

I think you'll make more money buying oil futures if you want to make a bet like that.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 17, 2015, 10:31:58 AM
The probability of crude hitting anything above 70 for an extended (longer than 6 months) is highly unlikely, as a lot of struggling producers like Penn West would aggressively hedge for the years out.

Quality companies like PXD, EOG, and CLR would bring rigs back online, then markets will take that into account and knock down prices. This will create mini cycles as opposed to long term cycles.

Watch this video from Zach Schreiber for more insights. https://www.youtube.com/watch?v=ht9mmoLBOYE
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on September 17, 2015, 10:44:17 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

Sure. And why do big moves in either direction need to happen any time soon? Prices stayed low for years, if not decades, many times in the past.

I think for any commodity, relatively low prices/margins are more stable than high prices/margins (especially true if you adjust for inflation).

As someone else has said, if you want to place bets and speculate on price moves, there are options and future markets for that. If you buy stock in a business, I think you should primarily care about the economics of that particular business and what is under the control of that business' management.

One scenario that is just as plausible as any other to me (I have no idea what will happen) is that oil prices stay low for a few years, just long enough for mass-market electric cars to come out (200+ miles range for prices in the $20-30K range) and we enter a new era of demand destruction (it'll ramp up over many years, but it'll have an impact at the margin) just a decade after fracking and directional drilling technology has made it quick and easy to tap more wells and flood the market.

Food for thoughts.
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 17, 2015, 11:17:27 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

I think you'll make more money buying oil futures if you want to make a bet like that.

There is more leverage in PWE to rising oil prices, than oil futures, based on the cost of the futures, in my opinion. Futures don't give you that much leverage, relatively speaking to PWE. Also, there is some possibility that if all PWE assets were sold, the NAV per share would be more than the stock price.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 17, 2015, 11:26:55 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

I think you'll make more money buying oil futures if you want to make a bet like that.

There is more leverage in PWE to rising oil prices, than oil futures, based on the cost of the futures, in my opinion. Futures don't give you that much leverage, relatively speaking to PWE. Also, there is some possibility that if all PWE assets were sold, the NAV per share would be more than the stock price.

Also, PWT is a managed flyer on higher oil prices, as are the other examples bought by Packer to the thread. 
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 17, 2015, 11:35:30 AM
Why aren't all the worried individuals going out and buying: SPDR S&P Biotech ETF (XBI)?

It is not commodities so products can be differentiated. The price keeps going up, so the risk to go zero must be less right? Stay with what has worked.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 17, 2015, 11:36:38 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

Sure. And why do big moves in either direction need to happen any time soon? Prices stayed low for years, if not decades, many times in the past.

I think for any commodity, relatively low prices/margins are more stable than high prices/margins (especially true if you adjust for inflation).

As someone else has said, if you want to place bets and speculate on price moves, there are options and future markets for that. If you buy stock in a business, I think you should primarily care about the economics of that particular business and what is under the control of that business' management.

One scenario that is just as plausible as any other to me (I have no idea what will happen) is that oil prices stay low for a few years, just long enough for mass-market electric cars to come out (200+ miles range for prices in the $20-30K range) and we enter a new era of demand destruction (it'll ramp up over many years, but it'll have an impact at the margin) just a decade after fracking and directional drilling technology has made it quick and easy to tap more wells and flood the market.

Food for thoughts.

Re: your last scenario.  These companies can turn off the taps along the way and still make money.  It wont happen that rapidly. 

The other part of the scenario you present is the consolidation phase.  PWT would end up being eaten by someone much bigger - hopefully above the present share price. 

When I think about XOM, SU, BP, pr Chevron I know who will be the leaders on alt. energy.  We saw the same thing happen when the internet was born in the mid 1990s.  There were hundreds of service providers in Ontario.  Now there are two in Ontario of any consequence - Bell and Rogers.  The same will happen in the energy space. 

RE: PWT - my total exposure to this company is <2% of my holdings.  Is that a vote of confidence or a flyer on higher oil prices?  If it triples, it pays my expenses for a year.  If it goes to zero it equals the daily fluctuation in my portfolio - on a quiet day. 
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on September 17, 2015, 11:45:33 AM
Why aren't all the worried individuals going out and buying: SPDR S&P Biotech ETF (XBI)?

It is not commodities so products can be differentiated. The price keeps going up, so the risk to go zero must be less right? Stay with what has worked.

Cardboard

I don't think the only choices are PWE or XBI...
Title: Re: PWE - Penn West Petroleum
Post by: Liberty on September 17, 2015, 11:48:12 AM
Re: your last scenario.  These companies can turn off the taps along the way and still make money.  It wont happen that rapidly. 

The other part of the scenario you present is the consolidation phase.  PWT would end up being eaten by someone much bigger - hopefully above the present share price. 

When I think about XOM, SU, BP, pr Chevron I know who will be the leaders on alt. energy.  We saw the same thing happen when the internet was born in the mid 1990s.  There were hundreds of service providers in Ontario.  Now there are two in Ontario of any consequence - Bell and Rogers.  The same will happen in the energy space. 

RE: PWT - my total exposure to this company is <2% of my holdings.  Is that a vote of confidence or a flyer on higher oil prices?  If it triples, it pays my expenses for a year.  If it goes to zero it equals the daily fluctuation in my portfolio - on a quiet day.

It's possible. It was just one of many scenarios. But assuming that the industry as a whole will be rational and will just turn off the tap seems problematic to me. There's a prisoner's dilemma situation going on, and if anything, the coordination in the industry seems to be going down among the big national players, not up.

But your scenario is also certainly plausible. But maybe it all shakes out in a year or two, maybe it takes ten, who knows?
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 17, 2015, 11:53:13 AM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

I think you'll make more money buying oil futures if you want to make a bet like that.

There is more leverage in PWE to rising oil prices, than oil futures, based on the cost of the futures, in my opinion. Futures don't give you that much leverage, relatively speaking to PWE. Also, there is some possibility that if all PWE assets were sold, the NAV per share would be more than the stock price.

Also, PWT is a managed flyer on higher oil prices, as are the other examples bought by Packer to the thread.

I disagree that the low cost O&G firms are flyers on higher oil prices.  Some of these names (all except Peyto) are cheap based upon today's prices and any upside is gravy.  Given their capital efficiency these guys could become the O&G compounders of the future, similar to Peyto today or Contango before the passing of Ken Peak.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 17, 2015, 12:31:54 PM
Quote
if crude settles at $75 in 12 months

How do you calculate the probabilities of that? Feels a bit like Commodity Price Roulette to me.

I agree - that is what makes valuing commodity-based businesses tough.  But if oil can fall so easily from $100 to $45, why can't it rise back to $75+ in 12 months?

I think you'll make more money buying oil futures if you want to make a bet like that.

There is more leverage in PWE to rising oil prices, than oil futures, based on the cost of the futures, in my opinion. Futures don't give you that much leverage, relatively speaking to PWE. Also, there is some possibility that if all PWE assets were sold, the NAV per share would be more than the stock price.

Also, PWT is a managed flyer on higher oil prices, as are the other examples bought by Packer to the thread.

I disagree that the low cost O&G firms are flyers on higher oil prices.  Some of these names (all except Peyto) are cheap based upon today's prices and any upside is gravy.  Given their capital efficiency these guys could become the O&G compounders of the future, similar to Peyto today or Contango before the passing of Ken Peak.

Packer

For that purpose I already hold Arx and wcp. 
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 17, 2015, 12:48:39 PM
Regarding oil, this is not a repeat of 1986. Back then Saudi Arabia was producing around 3.6 million barrels a day down from a production above 10 million in 1980.

Today they are maxed out. They have no spare capacity.

A ton of big projects were also coming on stream back then: North Sea, Alaska ,etc. These were already funded projects and could not be stopped easily and Saudi Arabia wanted to sell 6 more million barrels a day.

Where is the comparison today? Shale is already shut and coming down fast. Oil sands expansion will grind to a halt. Brazil is forecasting half or what they were supposed to produce in 2020. Irak has sent notices to majors to slow spending because they cannot afford their share. I guess it leaves Iran or 500,000 to 1 million barrels a day?

The other thing that people do not seem to comprehend is that lifting oil once all infrastructure, drilling and completion has been done is very cheap unless you are operating a stripper well that produces 2 or 3 barrels a day. These are netbacks. That is the cost to extract your ready to go production, not your entire reserves.

People that claim that oil can be profitably extracted at these prices in NA are crazy. This excludes any capital to get there. Hence higher prices are needed to obtain positive ROCE and the bankers know that. So forget about shale being some kind of switch that can be simply turned on and off: you need people: gone (you think that they will simply sit and wait after around after being fired for months?), cheap capital: gone and profitable projects/land: more and more gone as they are being used up with high grading.

You can mark my words, funding will not be available for a long time or only if hedged and on really low cost projects. This can only mean one thing and that is declining supply.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 17, 2015, 01:13:24 PM
Regarding oil, this is not a repeat of 1986. Back then Saudi Arabia was producing around 3.6 million barrels a day down from a production above 10 million in 1980.

Today they are maxed out. They have no spare capacity.

A ton of big projects were also coming on stream back then: North Sea, Alaska ,etc. These were already funded projects and could not be stopped easily and Saudi Arabia wanted to sell 6 more million barrels a day.

Where is the comparison today? Shale is already shut and coming down fast. Oil sands expansion will grind to a halt. Brazil is forecasting half or what they were supposed to produce in 2020. Irak has sent notices to majors to slow spending because they cannot afford their share. I guess it leaves Iran or 500,000 to 1 million barrels a day?

The other thing that people do not seem to comprehend is that lifting oil once all infrastructure, drilling and completion has been done is very cheap unless you are operating a stripper well that produces 2 or 3 barrels a day. These are netbacks. That is the cost to extract your ready to go production, not your entire reserves.

People that claim that oil can be profitably extracted at these prices in NA are crazy. This excludes any capital to get there. Hence higher prices are needed to obtain positive ROCE and the bankers know that. So forget about shale being some kind of switch that can be simply turned on and off: you need people: gone (you think that they will simply sit and wait after around after being fired for months?), cheap capital: gone and profitable projects/land: more and more gone as they are being used up with high grading.

You can mark my words, funding will not be available for a long time or only if hedged and on really low cost projects. This can only mean one thing and that is declining supply.

Cardboard

I disagree with several things you said.

OPEC does have spare capacity in the tunes of 2.5 million bbl/d to 3.5 million bbl/d.

Private equity capital are abundant and on the sidelines waiting for deals, so cheap capital is still there.

This is not to say oil production won't decline. It will, I estimate most of the oversupply to get fixed given current pricing economics by the end of 2016. This is not to say that oil will spike back to 100. I think oil will spike, then fall, spike, fall, as market anticipates potential demand from the Permian, Eagle Ford, and Bakken.

I think oil might go back to $60-$70 and fluctuate and overshoot.

Looking at Penn West's financials, using Q4 2014 numbers, PWE won't be able to keep productions flat giving current prices. PWE operates currently at a ~C$100 million give or take deficiency. So investors have to figure out, even if oil spikes to C$70, how long can PWE last? My estimates indicate 2.5 - 3 years.

Title: Re: PWE - Penn West Petroleum
Post by: constala on September 17, 2015, 01:36:15 PM
For PWE bulls: have a look at the LEAP calls! If we agree that we face here a "make or break situation" and that PWE equity value could be totally wiped out should oil stay low and the non core assets non sold, but that upside is multifold, then we might as well buy a Call Option on PWE to extract maximum leverage: buy as much CALL premium as our anticipated risk budget in the common cash value....and get free non recourse leverage...I just wanted to highlight the Jan 2017 Call strike $1.00 which are offered at a meager 0.25.....@500 days for a come back.....and a very handsome leverage indeed: should PWE get back quickly to $2.00 the LEAP could well be a 5 bagger versus 3.5 bagger on the "delta 1" vanilla PWE equity.
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 17, 2015, 01:37:09 PM
Regarding oil, this is not a repeat of 1986. Back then Saudi Arabia was producing around 3.6 million barrels a day down from a production above 10 million in 1980.

Today they are maxed out. They have no spare capacity.

A ton of big projects were also coming on stream back then: North Sea, Alaska ,etc. These were already funded projects and could not be stopped easily and Saudi Arabia wanted to sell 6 more million barrels a day.

Where is the comparison today? Shale is already shut and coming down fast. Oil sands expansion will grind to a halt. Brazil is forecasting half or what they were supposed to produce in 2020. Irak has sent notices to majors to slow spending because they cannot afford their share. I guess it leaves Iran or 500,000 to 1 million barrels a day?

The other thing that people do not seem to comprehend is that lifting oil once all infrastructure, drilling and completion has been done is very cheap unless you are operating a stripper well that produces 2 or 3 barrels a day. These are netbacks. That is the cost to extract your ready to go production, not your entire reserves.

People that claim that oil can be profitably extracted at these prices in NA are crazy. This excludes any capital to get there. Hence higher prices are needed to obtain positive ROCE and the bankers know that. So forget about shale being some kind of switch that can be simply turned on and off: you need people: gone (you think that they will simply sit and wait after around after being fired for months?), cheap capital: gone and profitable projects/land: more and more gone as they are being used up with high grading.

You can mark my words, funding will not be available for a long time or only if hedged and on really low cost projects. This can only mean one thing and that is declining supply.

Cardboard

I disagree with several things you said.

OPEC does have spare capacity in the tunes of 2.5 million bbl/d to 3.5 million bbl/d.

Private equity capital are abundant and on the sidelines waiting for deals, so cheap capital is still there.

This is not to say oil production won't decline. It will, I estimate most of the oversupply to get fixed given current pricing economics by the end of 2016. This is not to say that oil will spike back to 100. I think oil will spike, then fall, spike, fall, as market anticipates potential demand from the Permian, Eagle Ford, and Bakken.

I think oil might go back to $60-$70 and fluctuate and overshoot.

Looking at Penn West's financials, using Q4 2014 numbers, PWE won't be able to keep productions flat giving current prices. PWE operates currently at a ~C$100 million give or take deficiency. So investors have to figure out, even if oil spikes to C$70, how long can PWE last? My estimates indicate 2.5 - 3 years.

Aren't there several Penn West-like firms throughout the world? Many of the 'good' firms are guiding to much lower capex spend, let alone the ones that go bankrupt and discontinue all capex. This will eventually lead to substantial production declines - although I can't tell you how long that will take. Not trying to put words in your mouth, but don't you think that dramatic capex reduction will lead to a dramatic undersupply of oil in the next 12-24 months, with the only exception being prices slowly rising now?

I tend to believe that supply will greatly decrease at current pricing over time, which would lead to an enormous price spike the longer this pricing continues. There are too many players, with lagging capex changes to the oil price, for the capex reductions to precisely hit a supply equilibrium.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 17, 2015, 02:02:01 PM
There's this notion that rig count fall off 50% or capex cut by 50% means oil production will go down by 50%.

This isn't 1:1.

What does rig count tell us? It tells us that each rig in operation can drill x amount of wells per month. So the lower the rig count, the lower the amount of wells drilled. This doesn't mean productions fall off. Actually, not even close, because old wells are still producing, while new ones have much higher initial production rates, hence the GRADUAL decline in production.

What does capex cuts mean? When a company says, we are cutting capex. All it means is that it could stop growth in productions. A lot of firms I follow are KEEPING PRODUCTIONS FLAT with the capex cuts. This reinforces the point that oil production WON'T FALL OFF A CLIFF.

Finally, a lot of people don't understand that even though rig counts fall by 50%, there's a point in time which production declines will stop, because the current rig count can support this level of production without any problems (assuming similar EURs).

There are a lot of things in O&G that many people with no experience looking from the outside will say, "Gee, look at the decline in capex, productions should follow." But that's not how it works. There are so many other variables that play into it like rig productivity, the amount of levels a horizontal rig could go, spud, porosity and permeability of the play, servicing costs, supply costs, transportation costs, and more.

I'm heavily invested in O&G, but there are zeros on the market. And I think if you don't pick your pockets well, you will find zeros. Like I said in my last post, the way an investor handicaps the Penn West bet is you have to figure out what the current capital efficiency is. What's the capex just to keep productions FLAT? Then you calculate the level of sensitivity as with price movements and determine at what price environment will Penn West see a lot of trouble, and at what price it can live to fight another day. I have yet to see anyone give me this answer on this board.

You also have to remember, if someone wanted to buy Cardium assets, they would've bought already at prices above C$43,000. There are productions in Eagle Ford and Permian selling for $35,000 boe/d. So the relative valuations given the EUR profiling has to be taken into account.

I just have yet to find comparable companies with similar EURs and similar debt profiles indicate to me that $50k boe/d is a FAIR or good valuation.


Title: Re: PWE - Penn West Petroleum
Post by: ERICOPOLY on September 17, 2015, 02:08:41 PM
For PWE bulls: have a look at the LEAP calls! If we agree that we face here a "make or break situation" and that PWE equity value could be totally wiped out should oil stay low and the non core assets non sold, but that upside is multifold, then we might as well buy a Call Option on PWE to extract maximum leverage: buy as much CALL premium as our anticipated risk budget in the common cash value....and get free non recourse leverage...I just wanted to highlight the Jan 2017 Call strike $1.00 which are offered at a meager 0.25.....@500 days for a come back.....and a very handsome leverage indeed: should PWE get back quickly to $2.00 the LEAP could well be a 5 bagger versus 3.5 bagger on the "delta 1" vanilla PWE equity.

For the $2 price target scenario, what is better... writing that call or buying it?  Let's see...

It would be a 4 "bagger" (not a 5 as you claim) if you are paying your stated 25 cents for it.  So you are risking 100% loss due to option decay alone in order to outperform the plain vanilla common stock and it's 3.5x return.  I'm not finding that terribly compelling risk/reward -- you'd better be aiming for a lot more than $2 per share if that's the plan..

However, if you buy the common at 55 cents and write that $1 strike call for 25 cents (a covered call), you are risking 30 cents per share on a longer horizon.  And it's 3.03x if the shares reach $1.  For that matter, if the stock is still at 55 cents you've made an 83% return.   83% return if the stock goes absolutely nowhere.  Or more if they keep paying that dividend.


EDIT:  I now realize you said "should it get back quickly" meaning you expect there to be a premium still in it, in which case it could easily be a 5 "bagger" at $2...   I guess we have differing views on "quickly", but I guess you meant long before expiry.
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 17, 2015, 02:41:16 PM
There's this notion that rig count fall off 50% or capex cut by 50% means oil production will go down by 50%.

This isn't 1:1.

I just have yet to find comparable companies with similar EURs and similar debt profiles indicate to me that $50k boe/d is a FAIR or good valuation.

I agree that a 50-percent decline in global production would be a big deal (tongue certainly in cheek). However, I was referring to a potential 3-5 percent decline in global production in 2016. Do you think that would create a price spike? How much?
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 17, 2015, 02:58:18 PM
Quote
Looking at Penn West's financials, using Q4 2014 numbers, PWE won't be able to keep productions flat giving current prices. PWE operates currently at a ~C$100 million give or take deficiency. So investors have to figure out, even if oil spikes to C$70, how long can PWE last? My estimates indicate 2.5 - 3 years.

At 60$+ their netbacks would be (conservalively, without focusing on the better acreage) north of 25/30$/barrel given cost cutting already realized and operational optimizations realized and to be realized. Why is this bad?
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on September 17, 2015, 06:39:37 PM
There's this notion that rig count fall off 50% or capex cut by 50% means oil production will go down by 50%.

This isn't 1:1.

What does rig count tell us? It tells us that each rig in operation can drill x amount of wells per month. So the lower the rig count, the lower the amount of wells drilled. This doesn't mean productions fall off. Actually, not even close, because old wells are still producing, while new ones have much higher initial production rates, hence the GRADUAL decline in production.

What does capex cuts mean? When a company says, we are cutting capex. All it means is that it could stop growth in productions. A lot of firms I follow are KEEPING PRODUCTIONS FLAT with the capex cuts. This reinforces the point that oil production WON'T FALL OFF A CLIFF.

Finally, a lot of people don't understand that even though rig counts fall by 50%, there's a point in time which production declines will stop, because the current rig count can support this level of production without any problems (assuming similar EURs).

I would add that 50% of rigs were also drilling for more marginal production.  So the remaining rigs are targeting the cream of the cream and all the exploration and marginal stuff is gone.  The remaining rigs are laser focused on the best prospects. 

Most every major oil company drills wells across the return spectrum.  At least that is how it worked when I worked in the industry.  There are high return prospects, mid return prospects, and low return prospects.  There are multiple reasons for spending capital across the return spectrum.  One is that you can't have one geographic area spending all the capital while everyone else just sits on their hand.  I would bet that has changed and companies are being much more selective while slashing headcounts.
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on September 17, 2015, 07:40:36 PM
Here is what some O&G investors will learn the hard way before this cycle ends.  It doesn't matter how much capital you need to maintain production or what OPEC is doing.  What matters is that the value of the assets is greater than the value of the debt.  There is an oil price where that crossover occurs.  The bank will own the assets and the equity holders will hold worthless pieces of paper. 

With PWE, at what WTI price does that occur? 

Secondly, if PWE is close to that point, is this really a value opportunity or a lottery ticket?
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 17, 2015, 07:49:07 PM
Another complication is that with new technology the marginal cost of production is declining.  This leads to a declining crossover point and those firms whose costs are low and declining faster than other firms are at an advantage.  We may find that there are many uneconomic locations in the future that may be close to break-even today.  This may also be why Saudi is pumping as much as it can today with higher marginal prices than tomorrow when they will be lower.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 17, 2015, 09:01:36 PM
This is really very straight forward....

What is your best guess on the price of WTI 6 months (Mar 16), & 9 months out (Jun 16).
Is it higher than it is today. $5, 10, 15 ....
What would eps be at the WTI price.
Use a conservative multiple.

Folks, it is only US$0.55 - if it goes up to US$1.10 at any point in the next 6 months, simply sell it down - & take your $ contribution off the table.
2 shares, or a cup of coffee; what the hell risk do you really have.

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 18, 2015, 12:41:58 AM
you may find something useful
http://analysisreport.morningstar.com/stock/research?t=PWT&region=can&culture=en-US&productcode=MLE
http://cobrands.morningstar.ca/ProfileService/report/pdf/7AVeC9IEuZ/en-CA/0P000080HW/ST/Quote
http://cobrands.morningstar.ca/ProfileService/report/pdf/7AVeC9IEuZ/en-CA/0P000060NZ/ST/Quote




Title: Re: PWE - Penn West Petroleum
Post by: influx on September 18, 2015, 02:14:59 AM
This is really very straight forward....

What is your best guess on the price of WTI 6 months (Mar 16), & 9 months out (Jun 16).
Is it higher than it is today. $5, 10, 15 ....
What would eps be at the WTI price.
Use a conservative multiple.

Folks, it is only US$0.55 - if it goes up to US$1.10 at any point in the next 6 months, simply sell it down - & take your $ contribution off the table.
2 shares, or a cup of coffee; what the hell risk do you really have.

SD

I tend to agree BUT haven't pull the trigger
Folks I have this reasoning, bull-biased I think it is.
I'll pose some questions and items to really attack the bull case.

1. Management that is involved.
A. Why would Rick join?
   i. To save RBC 1% of the money they have in PWT/PWE? He is board member there too after all. This is a potential reason why he is in the place. Or is he in the place because multiple investors vouched for him?
   ii. To make money for himself ?
   iii. Career risk? Embarrassing him self. I dont believe this is possible.
   iv. Honesty, to reveal accounting errors
I am sure he thought of oil going down as a risk to his involvement
His involvement, and money he spent (though it could be little compared to his total net worth)
My verdict for point 1: Bull

B. Why would Roberts join?
   i. CEO challenge? He is not young to look for CEO challenge alone
   ii. Money? Sure.
   iii. Career risk? Sure, related to b.i
   iv. Honesty, to reveal accounting errors
My verdict: Neutral to Bull

2. Near term catalyst
   i. NYSE delisting. THEY MUST DO SOMETHING within 6 months? What? 2:1 (x:1) share consolidation? :)
   ii. higher oil prices. I am not sure.
   iii. Asset sales?
My verdict: Neutral to Bull

3. First Eagle involved, ~5%.
   i. Good sign
My verdict: Bull

4. Banks
   i. Obviously the management is well connected and has bank relations. That is fairly simple. Banks want to make this work
   ii. They may further relax the covenant terms. I dont like the extra % above 3 for the EBITDA debt ratio.
My verdict: Bull

5. Asset dispositions, workforce cut and etc.
   i. Is there a time? Depends how long this low oil environment is?
My verdict: Neutral

6. Oil price & time
   i. I thought and still think this will go lower to 'cure' for the high price
   ii. Even if Saudis want a larger market share, they will need time to get it. 1-2 years of low prices is simply to little time. I read Harvard Kennedy School report on SA, their wealth fund, budgets and all that. It doesnt look like they are anywhere near break even.
PWT/PWE will have to find a way to keep itself live. I think based on point 1,2 and 4
My verdict: Bear

7. Asymmetric possibility for gain ?
   i. Given the management and insider buying, I think there is great opportunity. Am I bull biased because I want to see this?
   
8. PWE/PWT numbers vs debt
My verdict just looking at this one only: Bear
I dont know when oil will go a little up or how long it will stay this low (or go lower)
Taking other points above into consideration I can make this verdict into Neutral with ease :)
I am rationalizing.




Thanks
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 18, 2015, 02:49:08 AM
And one line I forgot to add:
At C$0.72 per share, I am thinking this is almost impossible to go to 0 (restructuring) and fill for bankruptcy. Can it go lower and stay there for some time? Yes I think so. That is one risk I have not accepted yet. But, I am thinking the share going higher has a greater probability (subjective reasoning).
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 18, 2015, 03:05:07 AM
And one line I forgot to add:
At C$0.72 per share, I am thinking this is almost impossible to go to 0 (restructuring) and fill for bankruptcy. Can it go lower and stay there for some time? Yes I think so. That is one risk I have not accepted yet. But, I am thinking the share going higher has a greater probability (subjective reasoning).

Given where Penn West's debt is at, the phrase "this is almost impossible to go to 0 (restructuring) and fill for bankruptcy" is so wrong, I don't even know where to begin with.

In the points you've stated, you said, "PWT/PWE will have to find a way to keep itself live. I think based on point 1,2 and 4." This point overrides everything else. Assets are O&G comps' only competitive advantage. There's nothing else to it. And then the numbers are all boiled down to capital efficiency and cost. These are two numbers not used very interchangeably on this thread. No one, and I mean not a single bull has talked about the ACTUAL calculation of the longevity of PWE.

I have calculated, and like I said earlier.

@ 60 WTI, PWE got 2.5 years. @50 it's got 1.5 before bk.

You make the decision.
Title: Re: PWE - Penn West Petroleum
Post by: Novak on September 18, 2015, 04:33:43 AM
@ 60 WTI, PWE got 2.5 years. @50 it's got 1.5 before bk.
You make the decision.

Is that with or without asset sales? I agree that if management fails to sell any assets, whether non-core properties, royalties, or even one of their core properties, we have a couple years of life left in this thing. I'm okay with that because:
(1) management has demonstrated that they are focused on paying down debt;
(2) lenders have demonstrated reasonable forbearance / flexibility;
(3) there is a proven market for PWE's properties;
(4) there is a proven market for their royalties; and
(5) My math tell me there's going to be a global supply shortfall in oil of more than 1 MMboe/d by mid-2016, with oil prices rising meaningfully in advance of that.

So, if PWE management changes course 180-degrees and sits on their hands from this point forward, I still think the company will be saved by higher oil prices and the stock will spike for some period in the next 18 months as traders euphorically rush into oil equities. But management will sell assets and they will reduce the debt load and they will push their survivability at ~$50 oil out for years.
We also have evidence that PWE's asset value substantially exceeds the value of their liabilities as it is today, so even with a liquidation at these prices there's a decent chance that equity will recover something - perhaps even more than $0.55/share.
Wilson-TPC, I get your concerns about the quality of the assets and efficiency and all of that, but we have evidence of its value regardless. I also wish we had everything needed to calculate the answer ourselves, but luckily we've been given the answer by an arms-length transaction.
Permanently losing investment capital from these levels requires a very improbable set of scenarios that reflect overly-bearish thinking that's counter to very recent evidence.
When I weigh that against the potential for a ridiculously high near-term return, PWE is a smart play at these prices.

Novak
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 18, 2015, 05:25:55 AM
And one line I forgot to add:
At C$0.72 per share, I am thinking this is almost impossible to go to 0 (restructuring) and fill for bankruptcy. Can it go lower and stay there for some time? Yes I think so. That is one risk I have not accepted yet. But, I am thinking the share going higher has a greater probability (subjective reasoning).

Given where Penn West's debt is at, the phrase "this is almost impossible to go to 0 (restructuring) and fill for bankruptcy" is so wrong, I don't even know where to begin with.

In the points you've stated, you said, "PWT/PWE will have to find a way to keep itself live. I think based on point 1,2 and 4." This point overrides everything else. Assets are O&G comps' only competitive advantage. There's nothing else to it. And then the numbers are all boiled down to capital efficiency and cost. These are two numbers not used very interchangeably on this thread. No one, and I mean not a single bull has talked about the ACTUAL calculation of the longevity of PWE.

I have calculated, and like I said earlier.

@ 60 WTI, PWE got 2.5 years. @50 it's got 1.5 before bk.

You make the decision.

You take all in consideration right? Including:
1. credit available, ~US$700M, could give more life if needed. I think this can be extended / increased if needed to. Why? Because the banks will get more in turnaround of oil prices from pwe, rather than (fire) sale of assets. Am I wrong in this reasoning?
2. no further (non)-core assets disposal

Please keep attacking the bull case. This is healthy.

You are more for BXE than for PWE from what I remember. What else in the more risky set of stocks? Apart from crc and oas. Some TSX listed. Want to compare.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 18, 2015, 05:51:36 AM
This is really very straight forward....

What is your best guess on the price of WTI 6 months (Mar 16), & 9 months out (Jun 16).
Is it higher than it is today. $5, 10, 15 ....
What would eps be at the WTI price.
Use a conservative multiple.

Folks, it is only US$0.55 - if it goes up to US$1.10 at any point in the next 6 months, simply sell it down - & take your $ contribution off the table.
2 shares, or a cup of coffee; what the hell risk do you really have.

SD

I tend to agree BUT haven't pull the trigger
Folks I have this reasoning, bull-biased I think it is.
I'll pose some questions and items to really attack the bull case.

1. Management that is involved.
A. Why would Rick join?
   i. To save RBC 1% of the money they have in PWT/PWE? He is board member there too after all. This is a potential reason why he is in the place. Or is he in the place because multiple investors vouched for him?
   ii. To make money for himself ?
   iii. Career risk? Embarrassing him self. I dont believe this is possible.
   iv. Honesty, to reveal accounting errors
I am sure he thought of oil going down as a risk to his involvement
His involvement, and money he spent (though it could be little compared to his total net worth)
My verdict for point 1: Bull

B. Why would Roberts join?
   i. CEO challenge? He is not young to look for CEO challenge alone
   ii. Money? Sure.
   iii. Career risk? Sure, related to b.i
   iv. Honesty, to reveal accounting errors
My verdict: Neutral to Bull

2. Near term catalyst
   i. NYSE delisting. THEY MUST DO SOMETHING within 6 months? What? 2:1 (x:1) share consolidation? :)
   ii. higher oil prices. I am not sure.
   iii. Asset sales?
My verdict: Neutral to Bull

3. First Eagle involved, ~5%.
   i. Good sign
My verdict: Bull

4. Banks
   i. Obviously the management is well connected and has bank relations. That is fairly simple. Banks want to make this work
   ii. They may further relax the covenant terms. I dont like the extra % above 3 for the EBITDA debt ratio.
My verdict: Bull

5. Asset dispositions, workforce cut and etc.
   i. Is there a time? Depends how long this low oil environment is?
My verdict: Neutral

6. Oil price & time
   i. I thought and still think this will go lower to 'cure' for the high price
   ii. Even if Saudis want a larger market share, they will need time to get it. 1-2 years of low prices is simply to little time. I read Harvard Kennedy School report on SA, their wealth fund, budgets and all that. It doesnt look like they are anywhere near break even.
PWT/PWE will have to find a way to keep itself live. I think based on point 1,2 and 4
My verdict: Bear

7. Asymmetric possibility for gain ?
   i. Given the management and insider buying, I think there is great opportunity. Am I bull biased because I want to see this?
   
8. PWE/PWT numbers vs debt
My verdict just looking at this one only: Bear
I dont know when oil will go a little up or how long it will stay this low (or go lower)
Taking other points above into consideration I can make this verdict into Neutral with ease :)
I am rationalizing.




Thanks

Very Nice analysis. 

To point 7: The costs of production in  NA and at PWt are coming down fast.  I am not thinking the Saudi's, .Russians, or others bother to keep up on the technology front.  Not because they cant steal the ideas, but because oil co.s are part of the social support fabric and there are built in costs to keeping employees, that the US and Canada dont have. 

It is quite conceivable if the low price regimen continues that drilling costs in NA drop below many other state controlled regimes. 

PWT is driving its costs way down.  As others above have referenced, the 50% rig reduction is targeting the best fields - the same applies to PWT. 

The situation is very dynamic.  As costs come down, cash flows rise, and debt repayment continues, etc.  We know PWT has taken dramatic steps to rein in costs, as have others.  The one benefit of being a bigger operation is access to technology and economies of scale. 



Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 18, 2015, 05:56:48 AM
For PWE bulls: have a look at the LEAP calls! If we agree that we face here a "make or break situation" and that PWE equity value could be totally wiped out should oil stay low and the non core assets non sold, but that upside is multifold, then we might as well buy a Call Option on PWE to extract maximum leverage: buy as much CALL premium as our anticipated risk budget in the common cash value....and get free non recourse leverage...I just wanted to highlight the Jan 2017 Call strike $1.00 which are offered at a meager 0.25.....@500 days for a come back.....and a very handsome leverage indeed: should PWE get back quickly to $2.00 the LEAP could well be a 5 bagger versus 3.5 bagger on the "delta 1" vanilla PWE equity.

The time is too short.  I held the very same Leaps last spring and the price has dropped dramatically since then.  Its very tough, Emotionally, trying to hold Leaps in this situation. 

My rationale is that, if/when PWT gets out of mortal danger the stock price will rebound for years.  500 days is simply not long enough. 
Title: Re: PWE - Penn West Petroleum
Post by: kfh227 on September 18, 2015, 06:07:39 AM
For PWE bulls: have a look at the LEAP calls! If we agree that we face here a "make or break situation" and that PWE equity value could be totally wiped out should oil stay low and the non core assets non sold, but that upside is multifold, then we might as well buy a Call Option on PWE to extract maximum leverage: buy as much CALL premium as our anticipated risk budget in the common cash value....and get free non recourse leverage...I just wanted to highlight the Jan 2017 Call strike $1.00 which are offered at a meager 0.25.....@500 days for a come back.....and a very handsome leverage indeed: should PWE get back quickly to $2.00 the LEAP could well be a 5 bagger versus 3.5 bagger on the "delta 1" vanilla PWE equity.

Why not just get the $2 options for 5 cents?

If PWE recovers, it's probably going well north of $2/share.  Even $3/share would be a 20x gain (ignoring premiums)
 whenever that would occur
Title: Re: PWE - Penn West Petroleum
Post by: constala on September 18, 2015, 07:18:34 AM
@kfh227,
the OTM call strike 2.00 is not a bad idea, but it is 5 bid 15 offer....so not so cheap....I'd rather hold the Strike 1.00 at 25 (20 bid 25 offer).
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on September 18, 2015, 06:37:22 PM
This is really very straight forward....

What is your best guess on the price of WTI 6 months (Mar 16), & 9 months out (Jun 16).
Is it higher than it is today. $5, 10, 15 ....
What would eps be at the WTI price.
Use a conservative multiple.

Folks, it is only US$0.55 - if it goes up to US$1.10 at any point in the next 6 months, simply sell it down - & take your $ contribution off the table.
2 shares, or a cup of coffee; what the hell risk do you really have.

SD

2012, the company earned $125 million at $94.17/boe WTI.

2013, the company lost $809 million at $98.00/boe WTI.

2014, the company lost $1733 million at 93.02/boe WTI.

At $45 WTI, what is the EPS going to be?  YTD they have already lost another $276 million.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 18, 2015, 07:58:17 PM
Just to throw out some points to the bear case.

1. Lenders cut back the credit lines. Negates the debt repayment of the asset sales.
- the PWT lenders have already reduced & tightened covenants
- much harder to push for it again when 500M has been repaid in the last 6 months
Yes it could happen. But drastic change is unlikely; it has already happened.

2. GS $20 oil in the near-term, $50 average for the next decade.
- GS actually thought there was a less than a 50% probability of $20 oil; their base case was $50-$60
- The headline is noise, & is clearly intended to herd traffic
GS published the report, it is a marketing piece, & all marketing is done to promote business.

3. Highly likely a horrible Q3 coming up.
- Quite true, especially where there also large layoffs
- Possibly loss along with the recent asset sale
Yes it is probably a loss quarter; but relatively speaking - most likely better than their peers

4. Highly likely a bad Q4 as well
- If oil stays at USD 50 there will be more reserve write-downs.
No. At the current $0.70 FX rate, USD 50 oil is CAD 71.42, and above the price reserves were last calculated at.

5. NYSE delisting
- This would be a disaster; no credibility at all.
- Has to be fixed, & right now!
No, this is US myopia. PWT has 6 months to fix it, & consolidation is a very easy last fix. Institutions (minor exceptions) are not invested in PWT at under USD 1, because they are not allowed to. No credibility to lose

6. Asset sale uncertainty
- Is there a Spearfish sale.
- Can they sell, for better than fire-sale prices.
Traders don't like uncertainty, longer term investors have much higher tolerances. This is just time arbitrage.

7. Takeover
- It could easily get stolen at a low price.
- Bankers could force the sale to protect their loans.
Yes it could happen, but most likely for a lot more than many would expect. Cross the USD 1 & USD 3 lines, & institutions can come back in; & would do so in quantity. Large blocks in strong hands are not going to sell overly cheaply.

The bear points are essentially short-term - done in 6 months. Trading. Invest longer & you are arbitraging time horizon.
Cdn bank brokerages just lowered their one year target price, yet the average is around $C 1.40. 100% higher.
The real fear is career risk, to bucking the trading view; not the actual future price of PWT, or oil.

SD

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 18, 2015, 08:08:32 PM
This is really very straight forward....

What is your best guess on the price of WTI 6 months (Mar 16), & 9 months out (Jun 16).
Is it higher than it is today. $5, 10, 15 ....
What would eps be at the WTI price.
Use a conservative multiple.

Folks, it is only US$0.55 - if it goes up to US$1.10 at any point in the next 6 months, simply sell it down - & take your $ contribution off the table.
2 shares, or a cup of coffee; what the hell risk do you really have.

SD

2012, the company earned $125 million at $94.17/boe WTI.

2013, the company lost $809 million at $98.00/boe WTI.

2014, the company lost $1733 million at 93.02/boe WTI.

At $45 WTI, what is the EPS going to be?  YTD they have already lost another $276 million.


2012 & 2013 were different management; the losses are also understated as we know management was manipulating accounting.
2014 included write-downs, & an accounting restatement, to fix previous management errors.
None of the comparable is valid.

SD
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on September 19, 2015, 08:38:43 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 21, 2015, 11:47:16 PM
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
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on September 22, 2015, 09:05:08 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on September 22, 2015, 09:07:33 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: jmp8822 on September 22, 2015, 09:13:31 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 22, 2015, 09:29:59 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 22, 2015, 01:52:03 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 23, 2015, 12:00:26 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: influx on September 23, 2015, 12:01:33 AM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 23, 2015, 04:47:42 AM
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. 

Title: Re: PWE - Penn West Petroleum
Post by: influx on September 23, 2015, 06:44:53 AM
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?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 23, 2015, 09:18:32 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on September 23, 2015, 12:36:27 PM
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.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 23, 2015, 12:56:24 PM
You might get surprised  ;)

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 23, 2015, 03:51:34 PM
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
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 24, 2015, 09:57:08 PM
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!
Title: Re: PWE - Penn West Petroleum
Post by: StevieV on September 25, 2015, 04:17:02 AM
"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?
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 25, 2015, 04:44:00 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: StevieV on September 25, 2015, 06:40:27 AM
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., $2 USD for PWE)?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 25, 2015, 07:56:51 AM
What is the need to confuse numbers with currencies when PWT/PWE numbers are available in CDN$?

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

Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 25, 2015, 08:13:08 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: tombgrt on September 25, 2015, 01:07:12 PM
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...
Title: Re: PWE - Penn West Petroleum
Post by: dutchman on September 25, 2015, 04:57:15 PM
Packer, can I ask how big of a position Bellatrix is for you ?   (forgive me if im prying  :) )
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 25, 2015, 08:48:26 PM
The smaller player are just going down for reasons I do not understand.  Currently, BXE is 5% and GXE and RMP 2-3%.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on September 26, 2015, 09:59:52 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 26, 2015, 11:01:02 AM
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
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 04:06:47 PM
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  ::)
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on September 26, 2015, 04:45:27 PM
It would be nice to see the sources for his numbers as I have not seen recent transactions anywhere near these numbers. 

Also have you looked at this guys other posts like predicting a giant rebound in oil prices by 2016 and being stopped out after investing $1 million in PWE in November of 2014.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 06:33:17 PM
I am not going to enter an argument about someone I am not related to but as far as I know his reasoning about oil prices is that they can's stay in the 40s too long and that 50+ is a minimum. 60+ is the long term trend with a preference for 70s in 2017 and beyond. That's his predictions but these are not the thoughts of someone insane.
I personally believe that Russian production has peaked, that Saudis have not spare capacity, they just stimulated as much possible when oil was at 90+ and have higher depletion rates than recognized, Iran will need 5 years just to get back where they were pre-sanctions and american production is falling much faster than thought... I think we are dancing at the edge of some steep slope to be honest but that's just my thoughts...

About property/asset sales:

The sale of Mitsue in Sept 2015 was for 43000$/boe/d:

From PWE web site and announcements:
"
The following are some of the key metrics and implied transaction multiples for the Mitsue properties for first half 2015:
Production
4,500 boe/d
Liquids Weighting
78%
Operating Cost
$29.00/boe
Field Netback
$8.50/boe
Implied Production Multiple
$43,000/boe/d
Implied Net Operating Income Multiple
14x
"
This was one of the weaker assets in PWE's non core list.

July 2nd 2015, Cresent Acquires swan hills producers Coral Hill (3.2K bpd) for $258m... is that 82K per flowing?... Nawar uses less than 55k (40k to 50k depending on the scenario) for PWE's swan hills assets that are of less perf and for the sake of being more conservative.

I also heard him saying he increased his already large position in the last few quarters and yes he is in for more than 1M shares.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on September 26, 2015, 06:37:59 PM
Say oil and gas stay at today's level, what's BXE's fair value in your opinon?

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
Title: Re: PWE - Penn West Petroleum
Post by: argonaut on September 26, 2015, 06:38:59 PM
Hi Packer,

Did you decide to invest in gear and rmp as part of a basket with bxe or additional standalone interesting choices... Or both? I tend to just have one stock in each industry unless there is a pretty compelling opportunity to have more.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 06:39:53 PM
I am not going to enter an argument about someone I am not related to but as far as I know his reasoning about oil prices is that they can's stay in the 40s too long and that 50+ is a minimum. 60+ is the long term trend with a preference for 70s in 2017 and beyond. That's his predictions but these are not the thoughts of someone insane.
I personally believe that Russian production has peaked, that Saudis have not spare capacity, they just stimulated as much possible when oil was at 90+ and have higher depletion rates than recognized, Iran will need 5 years just to get back where they were pre-sanctions and american production is falling much faster than thought... I think we are dancing at the edge of some steep slope to be honest but that's just my thoughts...

About property/asset sales:

The sale of Mitsue in Sept 2015 was for 43000$/boe/d:

From PWE web site and announcements:
"
The following are some of the key metrics and implied transaction multiples for the Mitsue properties for first half 2015:
Production
4,500 boe/d
Liquids Weighting
78%
Operating Cost
$29.00/boe
Field Netback
$8.50/boe
Implied Production Multiple
$43,000/boe/d
Implied Net Operating Income Multiple
14x
"
This was one of the weaker assets in PWE's non core list.

July 2nd 2015, Cresent Acquires swan hills producers Coral Hill (3.2K bpd) for $258m... is that 82K per flowing?... Nawar uses less than 55k (40k to 50k depending on the scenario) for PWE's swan hills assets that are of less perf and for the sake of being more conservative.

I also heard him saying he increased his already large position in the last few quarters and yes he is in for more than 1M shares.

If they could get 192M for Mitsue they can get 300+ for Swan Hills after assuming additional discounting just for the sake of it.
And the what about NE BC & NW AB (8000 boe/d), East Central AB (7000 boe/d), Weyburn, PROP and other properties... they may get 1B for all this.

The remains the 54k of core production that's still profitable at 40$ (their data).

Cheers.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 26, 2015, 08:39:23 PM
"It would be nice to see the sources for his numbers as I have not seen recent transactions anywhere near these numbers."

It would be nice Packer if you could post examples of recent transactions at low prices because I have not seen any.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 09:43:18 PM
http://www.morningstar.co.uk/uk/news/142447/us-oil-production-fall-will-be-worse-than-markets-expect.aspx

US production about to fall more than expected?  :o
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 26, 2015, 10:14:56 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 11:18:35 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 11:31:12 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 26, 2015, 11:47:20 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 11:50:20 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.

Alright if you say so... I do not like to argue too long to be honest.
15K to 45K per flowing on non core assets is conservative given the numbers you just gave however... and these are the numbers presented earlier.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 26, 2015, 11:51:31 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

And for god sake, at least get your fkn facts straight.

http://www.prnewswire.com/news-releases/penn-west-announces-sale-of-mitsue-properties-for-1925-million-527655851.html

It would really be a shame if you made a miscalculation cause you got the exchange rate wrong.

Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 26, 2015, 11:52:14 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.

Alright if you say so... I do not like to argue too long to be honest.
15K to 45K per flowing on non core assets is conservative given the numbers you just gave however... and these are the numbers presented earlier.

Arguing? Dude, check your numbers. It's one thing to be delusional, it's another to be FACTUALLY WRONG.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 26, 2015, 11:54:41 PM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.

Alright if you say so... I do not like to argue too long to be honest.
15K to 45K per flowing on non core assets is conservative given the numbers you just gave however... and these are the numbers presented earlier.

Arguing? Dude, check your numbers. It's one thing to be delusional, it's another to be FACTUALLY WRONG.

Nice catch you are right on this one. It is still above 1/2 of fire sale prices... Anyway, I am not trying to argue. This equity still looks grossly mis-priced to me.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on September 27, 2015, 12:01:11 AM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.

Alright if you say so... I do not like to argue too long to be honest.
15K to 45K per flowing on non core assets is conservative given the numbers you just gave however... and these are the numbers presented earlier.

Arguing? Dude, check your numbers. It's one thing to be delusional, it's another to be FACTUALLY WRONG.

Nice catch you are right on this one. It is still above 1/2 of fire sale prices... Anyway, I am not trying to argue. This equity still looks grossly mis-priced to me.

I agreed it's mispriced.

Using Mitsue sale metrics on the whole company, PWE stock should be worth 3.4 ish Canadian.

(91,164 * 43,000 - 2,205,000,000) /502,000,000 = 3.41

The problem is SELLING the WHOLE piece. That's always problematic.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 27, 2015, 12:09:49 AM
Guys, everyone is on the same page here. Packer and I have just as much vested interest in Penn West being able to sale acreages in these plays at C$70k flowing boe/d.

That would be amazing if we see those kind of multiples.

Unfortunately, we won't. I am long in BXE and Gear, but that doesn't make me delusional to reality.

These multiples are very high. If you slap these cardium multiples on BXE, I wouldn't even know what to do with myself other than to disbelieve. Not to mention, BXE also has Duvernay!

I REALLY HOPE you guys are spot on. My conversation with the people actually doing the M&A in Alberta leads me to believe otherwise.

In the next few months, we will start to see M&A pick up. There will be a lot more deals announced by the end of the year. Until then, everything we do here is a guessing game.

Who talked about 70k per flowing for PWE's non core assets??? In Nawar's fire sale spreadsheet most assets are in between 15K and 45k per flowing. All lower than Mitsue that has 8.5$ netback/barrel and 29$ operating costs - more than 2 to 3 times worse than most PWE producing assets...
I calculated that if Roberts suddenly woke up one day in the current environment and decided that the company would die if he didn't sell it immediately and was putting it for sale at fire sale prices on the fire sale prices already - let's say 1/2 of fire sale prices, the market cap would still be twice today's market cap...

Also I do not know why you ignore Mitsue's sale: it happened this month at 49K$ per flowing or close to 65K C$ per flowing for assets with 8.5$/boe netback. This is not speculating or guessing or what not, it is what happened a few weeks ago in the field...
What about Crescent acquisition in July 2015 in Swan Hills at 82K$ per flowing from a previous post? These are actual tangible facts - Do not take it badly but I wonder who is being vague and playing the guessing game (discussions with M&A people) and who is being real (actual public transactions)?
There are lots of companies like CPG, CNQ, Suncor etc... for example that are sitting on lots of cash and need to think about getting assets they can produce profitably in this environment. Oil sands and other more expensive products won't do it...

I cited the Cardium assets being valued at 70k per flowing boe/d.

Crescent's acquisition is now NO WHERE NEAR 82k flowing because it used EQUITY. Check the stock price, you might be surprised. Like I said earlier, if you talk to the people ACTUALLY doing the M&A, you would have gotten the answer, "Crescent used its overvalued stock and overpaid."

Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves.

I don't know where you get your optimism from. You cited one deal that was severely overvalued, Crescent stock price since has taken a bath because of acquisitive style, and you tell me i'm guessing and citing crap.

I think you should call up the oil and gas executives in Alberta and ask around what you think a fair price in the current environment is.

Here are some people you should call:

Darren Gee
Don Gray
Ingram Gillmore
Ray Smith
Steve Toth

Maybe they can shine some light on you as to what an appropriate per flowing boe/d valuation is.

In times like this, it's much better to be conservative.

Alright if you say so... I do not like to argue too long to be honest.
15K to 45K per flowing on non core assets is conservative given the numbers you just gave however... and these are the numbers presented earlier.

Arguing? Dude, check your numbers. It's one thing to be delusional, it's another to be FACTUALLY WRONG.

Nice catch you are right on this one. It is still above 1/2 of fire sale prices... Anyway, I am not trying to argue. This equity still looks grossly mis-priced to me.

I agreed it's mispriced.

Using Mitsue sale metrics on the whole company, PWE stock should be worth 3.4 ish Canadian.

(91,164 * 43,000 - 2,205,000,000) /502,000,000 = 3.41

The problem is SELLING the WHOLE piece. That's always problematic.

If they can sell non core assets are prices even lower than our fire sale estimates, immediate concerns about debt would disappear and remaining production (core) would be not only profitable at current prices but also optimizable (following the current optimization procedures - 5 - 10% cost reductions?). So that survivability is not a concern for a few years at least. They will become one of the very low costs producers in their respective regions. Who survives at 40+ for a few years is one question?
They can also merge the company with another one as a last resort solution.
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on September 27, 2015, 03:19:56 PM
You may want to keep in mind that with all the current layoffs, Alta senior executives are pretty depressed. It is a short term view, that sees the glass as half empty. Give them six months of modestly higher prices, & the song sheet will be very different.

The recent big layoffs at the servicing companies are also hard evidence that US oil & shale drilling will be minimal this winter.
That production decline from high depletion rates on existing wells is not going to be made up from new wells; all else equal, there is going to be less swing production - & higher prices.

Nawar also just needs to be right once, there is no money to being a correctly predicting talking head.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 27, 2015, 08:16:52 PM
"The problem is SELLING the WHOLE piece. That's always problematic."

Who said that we were looking to sell the whole thing? We are talking about selling non-core assets at conservative prices which has been the history all along to reduce debt and costs in order to get a proper valuation for the core.

By the way, you should check your language. You too made a mistake before with exchange rates that I pointed out and did not care to acknowledge.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on September 28, 2015, 06:09:52 AM
"And for god sake, at least get your fkn facts straight."

I would like for you to do the same. Where is that coming from?

"Mitsue was 43k per flowing in Canadian dollars and 39k according to the buyers because they expect to grow reserves."

So a factually wrong statement based on Cardinal Energy`s Material Change Report and I would say illogical: Since when do growth in reserves impact current price paid per flowing boe?

"On September 15, 2015, we entered into an agreement (the "Acquisition Agreement") with a private company ("PrivateCo") and an unrelated third party (the "Vendor") pursuant to which we agreed to purchase a 75% interest and PrivateCo agreed to purchase a 25% interest in certain strategic light oil assets focused primarily in the Mitsue area of Alberta from the Vendor for an aggregate purchase price of $192.5 million. Our share of the purchase price for the assets to be acquired by us (the "Acquired Assets") will be approximately $129 million after estimated closing adjustments and the sale of a midstream asset to be acquired pursuant to the Acquisition, which we and PrivateCo plan to monetize concurrently with or shortly after the Acquisition (the "Disposition")."

The statement from Cardinal proves that Penn West said the truth in terms of overall price or $192.5 million.

"In summary, the highlighted benefits of the Acquired Assets and the Offering for us are as follows:
 the Acquired Assets are currently producing on average 3,300 boe/d (78% light crude oil and NGLs) with a production decline of approximately 10%;"

That statement from Cardinal also proves that Penn West said the truth in terms of price per flowing barrel:

3,300 / 75% = 4,400 boe/d (not being exactly at 4,500 boe/d is likely due to rounding)

And here is how you end up with the stated acquisition price from Cardinal which is post the midstream asset sale:

$129 million / 3,300 boe/d = $39,091 boe/d

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on September 29, 2015, 08:36:27 AM
China oil demand may be completely misunderstood by the markets according to Jefferies: http://www.bloomberg.com/news/articles/2015-09-29/jefferies-china-s-demand-for-oil-is-totally-misunderstood-by-the-market

"The composition of Chinese oil demand has shifted, reflecting policymakers' attempts to rebalance to growth driven more by domestic demand, rather than infrastructure projects fueled by subsidized credit."

"We also believe China's privately owned vehicles are starting to be driven more after spending years as parked trophies of middle-class aspiration,"
Title: Re: PWE - Penn West Petroleum
Post by: Novak on October 01, 2015, 04:15:14 AM
Penn West Announces The Sale Of Its Non-Operated 9.5% Working Interest In The Weyburn Unit For CAD$205 Million
http://pennwest.mediaroom.com/index.php?s=27585&item=135258 (http://pennwest.mediaroom.com/index.php?s=27585&item=135258)

They also announced a reduction in their full year production guidance by 2,000 boe/d on the top and bottom-end, to 84,000 - 86,000.

I'm very happy with the price. In November 2012, when oil was around $110, they sold an 11.7% NRI in Weyburn to Franco-Nevada for CAD$400.

Since then, oil is down 60% but the sale price per percentage is down about one-third. Not bad for this environment.

I'll note that the CAD$205 million is between Nawar's "fire sale" pricing estimate and his base estimate (much closer to the fire sale price).

This moves their total debt nicely below the CAD$2b - somewhere around CAD$1.8b.

Seems like a nice little bit of additional de-risking.
Title: Re: PWE - Penn West Petroleum
Post by: aws on October 01, 2015, 04:38:57 AM
More good news for the market to ignore.  I hope Nawar's estimation on the impact to the share price is as close as his selling price estimation, but I don't hold out much hope of that:

Quote
an additional $200m asset sale will push this stock back to $2+ CAD

Can someone clarify what the effective date of July 1 2015 for the sale means?  Does that mean all cashflows from that interest for Q3 will get transferred to the buyer?  How will this and Mitsue be reflected on the Q3 financials?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 01, 2015, 06:49:51 AM
That is right, the effective date is when sales and costs transfer to the buyer.

I don't think that these sales can be ignored much longer by the market. The last two have both been done at solid metrics for this environment. The resulting EV/boe/d, keeps coming down with both. And with both assets being non-core and at higher operating cost (when you add the capitalized cost at Weyburn), you end up with a company in the not too distant future with a production level and profitability level that can support its debt like the best in the WCSB.

They have done more than the banks and notes holders have asked for, so we should continue having them on our side. And as I mentioned on the Gear Energy thread, our bank line cannot be reduced until May 2019 based on reserve values unlike most producers.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on October 01, 2015, 07:49:20 AM
I think these deals are good news for all who are investing in this space.  Cash is still being paid at nice multiples for some of these properties.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 01, 2015, 07:55:34 AM
Surreal. I think i'm getting a better sense of how these deals are being priced.

Will need a few more of these to confirm my understanding of how these deals are being priced.

Must say, Penn West's CEO is a dealmaker. He's doing a great job.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 01, 2015, 08:13:11 AM
I just worked a back of the envelope carrying cost for the debt:

At 2.2 B and 6.5% interest it cost ~ 140 M/annum

bring it down to 1.8 b at - 6.0% - 108m/annum (I used 6% on the assumption they are retiring the most expensive debt where they can. 

There is also an surcharge reduction on some of the debt with their senior debt to Ebitda being kess than 3.1 now.  There might be some savings on the credit line portion with this adjustment 0.5 %.

40 million per annum debt savings plus 20 from dividend = 60 m total without even getting into operating costs reductions, and reductions in currency hedge cost.  There will be some one time prepayment hits this quarter.  The existing oil and gas hedges will cover more of the remaining production - this could work either way I guess.

This is just back of the envelope stuff so dont tear me to shreds over it.
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 01, 2015, 10:00:48 AM
I just worked a back of the envelope carrying cost for the debt:

If oil stay at 40 (it could go even lower but long term I see $40 as the worst case long-term avg price), how much more debts do they need to shed? now they are at 1.8b CAD

=====

At 2.2 B and 6.5% interest it cost ~ 140 M/annum

bring it down to 1.8 b at - 6.0% - 108m/annum (I used 6% on the assumption they are retiring the most expensive debt where they can. 

There is also an surcharge reduction on some of the debt with their senior debt to Ebitda being kess than 3.1 now.  There might be some savings on the credit line portion with this adjustment 0.5 %.

40 million per annum debt savings plus 20 from dividend = 60 m total without even getting into operating costs reductions, and reductions in currency hedge cost.  There will be some one time prepayment hits this quarter.  The existing oil and gas hedges will cover more of the remaining production - this could work either way I guess.

This is just back of the envelope stuff so dont tear me to shreds over it.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 01, 2015, 01:37:50 PM
Less debt is normally always better but, when is it low enough or an adequate amount of leverage?

I did some quick math today to compare PWT with some of the favourites oily stocks in the Canadian oil patch or those that trade at EV/boe/d of $80,000 to $120,000 or far above PWT current $24,500:

CPG has $4.3 billion in net debt or $26,300 per boe/d
VET has $1.3 billion in net debt or $23,600 per boe/d
WCP has $0.75 billion in net debt or $18,700 per boe/d

PWT has now $1.75 billion in net debt (following this transaction and adjusting for the move in exchange rate since June 30) or $20,350 per boe/d

Now, some will argue that these companies are better hedged, that they will show production growth in 2016 or that the assets are better (not so sure on that one: each one has very good and some ok assets). However, it is kind of clear that something is really out of whack.

I think that considering its history, that investors and analysts will demand less debt per boe/d from PWT. More asset sales will also improve its ability to re-invest in its core plays and produce more EBITDA which eventually will become a virtuous circle with among other things less interest payments going out the door as Uccmal pointed out.

The thing is that they only sold 2 out of the 7 listed non-core assets from the September 1 corporate presentation and they are already in much better shape than they were. Bargaining power to sell the rest is going up, not down. So eventually the Street will wake up and price the stock at least as a going concern.

Regarding $40 or $45 oil long term, then I believe that none of the companies listed above can retain any debt. Hedges would all runoff and there would simply be not enough free cash flow to service any debt repayment. IMO, they would all see production declines eventually since they would run out of cheap developed assets and would not have the capital to develop new ones. All-in costs and with a decent rate of return for these companies are quite a bit higher than $40 a barrel over a 5 or 10 year time frame.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 01, 2015, 01:57:47 PM
Less debt is normally always better but, when is it low enough or an adequate amount of leverage?

I did some quick math today to compare PWT with some of the favourites oily stocks in the Canadian oil patch or those that trade at EV/boe/d of $80,000 to $120,000 or far above PWT current $24,500:

CPG has $4.3 billion in net debt or $26,300 per boe/d
VET has $1.3 billion in net debt or $23,600 per boe/d
WCP has $0.75 billion in net debt or $18,700 per boe/d

PWT has now $1.75 billion in net debt (following this transaction and adjusting for the move in exchange rate since June 30) or $20,350 per boe/d

Now, some will argue that these companies are better hedged, that they will show production growth in 2016 or that the assets are better (not so sure on that one: each one has very good and some ok assets). However, it is kind of clear that something is really out of whack.

I think that considering its history, that investors and analysts will demand less debt per boe/d from PWT. More asset sales will also improve its ability to re-invest in its core plays and produce more EBITDA which eventually will become a virtuous circle with among other things less interest payments going out the door as Uccmal pointed out.

The thing is that they only sold 2 out of the 7 listed non-core assets from the September 1 corporate presentation and they are already in much better shape than they were. Bargaining power to sell the rest is going up, not down. So eventually the Street will wake up and price the stock at least as a going concern.

Regarding $40 or $45 oil long term, then I believe that none of the companies listed above can retain any debt. Hedges would all runoff and there would simply be not enough free cash flow to service any debt repayment. IMO, they would all see production declines eventually since they would run out of cheap developed assets and would not have the capital to develop new ones. All-in costs and with a decent rate of return for these companies are quite a bit higher than $40 a barrel over a 5 or 10 year time frame.

Cardboard

Are you using the new production guidance as your denominator?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 01, 2015, 04:24:58 PM
Yes, 86,000 boe/d or the middle of the new guidance: 84,000 - 88,000 boe/d.

http://www.bloomberg.com/news/articles/2015-10-01/penn-west-seen-selling-most-prized-oil-assets-as-debt-weighs?cmpid=yhoo

I can't believe that this analyst from Dundee Securities still published that bs this afternoon. He claims that we would need another $800 million in asset sale and that it should come from selling what is likely our best asset or the Viking while PWT has proven twice in a row, in less than a month, in what has been a terrible period for oil & gas, that they can get good pricing from non-core assets. If they sell the remaining 5 non-core assets, they would be close IMO to that additional $800 million.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 01, 2015, 05:38:38 PM
Yes, 86,000 boe/d or the middle of the new guidance: 84,000 - 88,000 boe/d.

http://www.bloomberg.com/news/articles/2015-10-01/penn-west-seen-selling-most-prized-oil-assets-as-debt-weighs?cmpid=yhoo

I can't believe that this analyst from Dundee Securities still published that bs this afternoon. He claims that we would need another $800 million in asset sale and that it should come from selling what is likely our best asset or the Viking while PWT has proven twice in a row, in less than a month, in what has been a terrible period for oil & gas, that they can get good pricing from non-core assets. If they sell the remaining 5 non-core assets, they would be close IMO to that additional $800 million.

Cardboard

You know what's crazy. I'm really loving these asset sales, because it helps me get a sense of how to calculate these per flowing multiples.

PGF sold almost an identical sized piece of the Weyburn unit back in 2012 for $315MM when oil prices were around US$90/bbl.

Penn West got 65% of 2012's valuation. That's inline with the 50% selloff in oil.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 01, 2015, 07:05:22 PM
I'm getting 24k per flowing in canadian. Can you walk me through how you are getting 20k?

That article you linked. That analyst is on crack or something.

Viking netback is $23.50 and produces 18,500 boe/d. If PWE sells this at 800 mil, then implied per flowing is 43k.

Crazy stupid valuation. I might not be a bull, but to me, that sounds stupid.

So if Penn West can sell the remainder of its noncore at a valuation of 30k per flowing, then it can pay off an additional 900 mil in debt.

That will leave it at 850 mil in debt and with 54,000 in core production. Decline seems to be 15% for that region.

.15*54,000 = 8,100 in production you have to replace per year.

Assuming Capital efficiency is around 25k, maintenance capex is 202.5 million.

PWE is assuming first half price deck, and doesn't say if it includes hedges or not. Let's assume no hedges included.

22.5*54,000*365 = 443.475 million in NOI.

With 850 mil in debt @ blended 6-7%, 51 - 59.5.

Cash flow would in essence be 443.475 - 202.5 - 55 in interest = 185.975 in remaining cash flow to pay down more debt.

There's a lot of change that has happened with these numbers. Q2 netbacks were higher thanks to WTI @60. So take that all into account, but numbers look good if they can divest all of the non-core.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 01, 2015, 08:35:50 PM
This was a calculation of mine or Net debt to boe/d to illustrate how many dollars of net debt are attached to each barrel (equivalent) produced for PWT and some peers. It was simply to show that other companies have as much debt per boe/d as PWT now and don't have a market cap of just a few hundred million $.

So, $1.75 billion of net debt divided by 86,000 boe/d = $20,350 per boe/d

The EV/boe/d or the traditional metric: ($0.34 B + $1.75 B) / 86,000 = $24,300 per boe/d

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 01, 2015, 08:59:19 PM
Gotcha. Thanks.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 02, 2015, 05:20:59 AM
The revised balance sheet gives them alot more breathing room.  At this point they can probably sit back a little and see how other things unfold.  One doesn't want to get rid of all your production either.

As to asset sale prices I think there is a certain amount of "Gentlemen's agreement" going on out west to this point.  Most of these people know each other.  They all know they could be in the same position as Rick George and Dave Roberts.  How many of the CEO's at other oil companies have actually worked for Rick George?  I dont think the deal making is as ruthless as members on this board think.  These guys are also in a perpetual job search so you dont want to piss off potential employers either. 

Round about way to say that fair pricing will be the rule, for now. 
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 02, 2015, 07:24:07 AM
As to asset sale prices I think there is a certain amount of "Gentlemen's agreement" going on out west to this point.  Most of these people know each other.  They all know they could be in the same position as Rick George and Dave Roberts.  How many of the CEO's at other oil companies have actually worked for Rick George?  I dont think the deal making is as ruthless as members on this board think.  These guys are also in a perpetual job search so you dont want to piss off potential employers either. 

Round about way to say that fair pricing will be the rule, for now.

Interesting observation. Thanks for sharing. Didnt think about it. But this is another pros (bull-bias) if this is a market reality over there in NA and Canada
Title: Re: PWE - Penn West Petroleum
Post by: aws on October 02, 2015, 10:14:23 AM
Wow, it's up 23% after being flat for most of the morning.  Delayed reaction to yesterday's news?
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 02, 2015, 10:19:04 AM
Wow, it's up 23% after being flat for most of the morning.  Delayed reaction to yesterday's news?

Mister market is efficient  ;D
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on October 03, 2015, 09:27:13 AM
Does anyone know the amount of cap-ex PWE requires to keep production flat?  I have not been able to find this number on the website or in their filings.  TIA.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 03, 2015, 02:27:27 PM
Nice to see the sale announcement this week; the market reaction was also very illuminating.

Keep in mind that in the WCSB, ya dance with the one that brung ya - and the dance partners go way back. It is widely expected that a lot of very good operators are going to lose their firms on this cycle; for no other reason than they were simply overleveraged, and unlucky, in a drop so severe - that nobody could have reasonably predicted it. Talent is rare, oil fields aren’t.

PWT has great land holdings, but needs to drill to keep the licenses. Many a start-up gets its break via a farm-in on a known field - in return for drilling it, & paying a royalty in production. Most hosts will also help out on the cost, distribution, & selling sides as well – by granting access to their facilities, at their lower cost (i.e.: flow through). Nobody resents it, because these are going to be tomorrow’s players, & one day it could be you.

It is highly likely that maintenance capex is also going to be a lot lower than many think, simply because of farm-ins. We would also expect that Greater Viking is going to be one of the main beneficiaries.

With the hard sales now done, & a wealth of very good talent coming available over the next year or so, PWT should do very well.

SD
Title: Re: PWE - Penn West Petroleum
Post by: plato1976 on October 03, 2015, 02:57:15 PM
Hard sales way from done, right? They need to deleverage more

Nice to see the sale announcement this week; the market reaction was also very illuminating.

Keep in mind that in the WCSB, ya dance with the one that brung ya - and the dance partners go way back. It is widely expected that a lot of very good operators are going to lose their firms on this cycle; for no other reason than they were simply overleveraged, and unlucky, in a drop so severe - that nobody could have reasonably predicted it. Talent is rare, oil fields aren’t.

PWT has great land holdings, but needs to drill to keep the licenses. Many a start-up gets its break via a farm-in on a known field - in return for drilling it, & paying a royalty in production. Most hosts will also help out on the cost, distribution, & selling sides as well – by granting access to their facilities, at their lower cost (i.e.: flow through). Nobody resents it, because these are going to be tomorrow’s players, & one day it could be you.

It is highly likely that maintenance capex is also going to be a lot lower than many think, simply because of farm-ins. We would also expect that Greater Viking is going to be one of the main beneficiaries.

With the hard sales now done, & a wealth of very good talent coming available over the next year or so, PWT should do very well.

SD
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 03, 2015, 03:38:24 PM
Hard sales way from done, right? They need to deleverage more

Nice to see the sale announcement this week; the market reaction was also very illuminating.

Keep in mind that in the WCSB, ya dance with the one that brung ya - and the dance partners go way back. It is widely expected that a lot of very good operators are going to lose their firms on this cycle; for no other reason than they were simply overleveraged, and unlucky, in a drop so severe - that nobody could have reasonably predicted it. Talent is rare, oil fields aren’t.

PWT has great land holdings, but needs to drill to keep the licenses. Many a start-up gets its break via a farm-in on a known field - in return for drilling it, & paying a royalty in production. Most hosts will also help out on the cost, distribution, & selling sides as well – by granting access to their facilities, at their lower cost (i.e.: flow through). Nobody resents it, because these are going to be tomorrow’s players, & one day it could be you.

It is highly likely that maintenance capex is also going to be a lot lower than many think, simply because of farm-ins. We would also expect that Greater Viking is going to be one of the main beneficiaries.

With the hard sales now done, & a wealth of very good talent coming available over the next year or so, PWT should do very well.

SD

You have already seen the list of non-core assets multiple times. This management is aggressively getting rid of non core assets as they now believe in oil lower for longer. Swan Hills is a big one that is still in the list. I think the expectations were around 700M for that one but in 2014. It seems they can still get around 400M for this one and then you have others. In the last investor meeting they reiterated that they are not sacrificing future drilling opportunities with these sales either.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 03, 2015, 03:44:59 PM
Yesterday's rig count decline news along with consumption growth outlook much stronger than thought are additional clues that indicate potential shortfall of oil supply against consumption in H2 2016...
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on October 03, 2015, 04:14:47 PM
Does anyone know the amount of cap-ex PWE requires to keep production flat?  I have not been able to find this number on the website or in their filings.  TIA.

Packer

Go with with $880 million and you'll be in the ball park.  In the short run they may be able to keep production flat with a little less capex but it will be an illusion.  If they produce the midpoint of their guidance, 86,000 boe/d, they need to spend at least $880 million to replace those barrels being produced, using the three year average F&D costs. 

Their netbacks have been $16/boe for the first 6 months of the year and they can't find barrels that cheap.  3 Year average F&D cost is around $28/boe.  Recycle ratios of less than 1 is a destruction of capital.  Creditors should be demanding they quit turning dollar bills into 50 cents. 

I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help.  It's really an NPV exercise and the math doesn't work, unless your discount rate is less that 5%.  At 10% discount rate the last years reserve report has -$2.00/shr in equity value and at 15% discount rate the equity value is -$3.60/sh.  This one is an option on rising oil prices.  Stick with your other picks and you won't be playing with fire. 
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 03, 2015, 05:34:19 PM
Does anyone know the amount of cap-ex PWE requires to keep production flat?  I have not been able to find this number on the website or in their filings.  TIA.

Packer

Go with with $880 million and you'll be in the ball park.  In the short run they may be able to keep production flat with a little less capex but it will be an illusion.  If they produce the midpoint of their guidance, 86,000 boe/d, they need to spend at least $880 million to replace those barrels being produced, using the three year average F&D costs. 

Their netbacks have been $16/boe for the first 6 months of the year and they can't find barrels that cheap.  3 Year average F&D cost is around $28/boe.  Recycle ratios of less than 1 is a destruction of capital.  Creditors should be demanding they quit turning dollar bills into 50 cents. 

I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help.  It's really an NPV exercise and the math doesn't work, unless your discount rate is less that 5%.  At 10% discount rate the last years reserve report has -$2.00/shr in equity value and at 15% discount rate the equity value is -$3.60/sh.  This one is an option on rising oil prices.  Stick with your other picks and you won't be playing with fire.

Hey Kevin,

I'm not a bull on PWE nor a bear, so just trying to understand the math here.

The 86,000 production. 30k of it is noncore, but if you look at their core production, the decline is only high teens.

If you use 17% as decline rate, your math would indicate capital efficiency of 60k per flowing. I don't think that's right.

I've reached out to management, haven't heard back. These types of stuff should be disclosed on the presentations. 
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 03, 2015, 06:32:04 PM
Does anyone know the amount of cap-ex PWE requires to keep production flat?  I have not been able to find this number on the website or in their filings.  TIA.

Packer

Go with with $880 million and you'll be in the ball park.  In the short run they may be able to keep production flat with a little less capex but it will be an illusion.  If they produce the midpoint of their guidance, 86,000 boe/d, they need to spend at least $880 million to replace those barrels being produced, using the three year average F&D costs. 

Their netbacks have been $16/boe for the first 6 months of the year and they can't find barrels that cheap.  3 Year average F&D cost is around $28/boe.  Recycle ratios of less than 1 is a destruction of capital.  Creditors should be demanding they quit turning dollar bills into 50 cents. 

I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help.  It's really an NPV exercise and the math doesn't work, unless your discount rate is less that 5%.  At 10% discount rate the last years reserve report has -$2.00/shr in equity value and at 15% discount rate the equity value is -$3.60/sh.  This one is an option on rising oil prices.  Stick with your other picks and you won't be playing with fire.

Hey Kevin,

I'm not a bull on PWE nor a bear, so just trying to understand the math here.

The 86,000 production. 30k of it is noncore, but if you look at their core production, the decline is only high teens.

If you use 17% as decline rate, your math would indicate capital efficiency of 60k per flowing. I don't think that's right.

I've reached out to management, haven't heard back. These types of stuff should be disclosed on the presentations.

Isn't the decline rate in the cardium around 16% and around 10% in the Greater Viking for example?
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on October 03, 2015, 07:20:18 PM
All I could fins was an Dec 14 analyst report with a capital efficiency of about $30k.  This would imply with a 17% decline rate would imply about $450m.  It would be nice for the company to provide this so we can see the economics going forward.  Gear does a great job showing CF sensitivity to oil prices.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 03, 2015, 07:26:33 PM
All I could fins was an Dec 14 analyst report with a capital efficiency of about $30k.  This would imply with a 17% decline rate would imply about $450m.  It would be nice for the company to provide this so we can see the economics going forward.  Gear does a great job showing CF sensitivity to oil prices.

Packer

I used 25k, but need a response from the company.
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on October 03, 2015, 07:29:54 PM

Hey Kevin,

I'm not a bull on PWE nor a bear, so just trying to understand the math here.

The 86,000 production. 30k of it is noncore, but if you look at their core production, the decline is only high teens.

If you use 17% as decline rate, your math would indicate capital efficiency of 60k per flowing. I don't think that's right.

I've reached out to management, haven't heard back. These types of stuff should be disclosed on the presentations.

What do you think it should be?  $/flowing BOE is calculated after the fact, it's not something you target.

Maintaining the asset base of a O&G company is straightforward.  If you pull x BOEs out of the ground you need to find x BOEs to replace those ones removed.  Keep in mind that not all BOEs are not created equal.  Secondly, a company can shorten or lengthen their reserve life index based on the mix of wells drilled so that is why it is difficult to use production as a measure.  Production may be flat but reserves can be declining if the RLI is decreasing.  They can drill short term high flush production wells that lack same volume of reserves and this will allow for flat production as the asset base is being depleted.  I call this an illusion. 

It's no mistake why many of these companies sell for below book value.  It's because capital has been destroyed.  They keep the game going by raising more equity. 

The recycle ratio is one way of measuring capital efficiency in the oil patch.  If a company's netback is $40/boe and their finding costs are $20 per boe that means they are creating 2x cash on cash undiscounted.  This doesn't mean the return is 100% as the BOEs will be produced between now and 100 years from now.  You have to calculate the IRR of the cumulative cashflow stream to determine the return.  Or you can simply look at returns on total capital to see what the actual full cycle IRRs are from the financial statements, but for most companies the calculation is easy because the numerator is zero. 

So talking about production numbers can be very misleading.  Every well is basically an NPV exercise.  If you take every BOE of production from today until the last well runs dry multiplied by the netback of that specific BOE and discount the entire stream back to today and you will have the total value of the company.  Of course these are operating cashflows. 

Talking about maintenance capex is not something you will ever find in a presentation because the variables that would go into the calculation is too difficult to determine.  BOEs from one area may be plowed back into the ground in another area, and the economics changes where ever you go.  You can only do rough approximations as I did above. 

As an alternative to my estimate above, you can look at their depletion expense which is the book value of the PP&E divided by total reserves times the percentage pull out of the ground that quarter.  For PWE that is just over $700 million annualized but with the asset sales it may be somewhere slightly less than that now.  This method is also fuzzy because in Canada under IFRS it is based on 2P reserves, which involves so many assumptions since many of the BOEs are not even on production. 

My number was based on replacing the BOEs taken out of the ground times the 3 year average finding costs.  If you want to use the depletion method you'd better hope they are much more efficient at finding new BOEs today than in the past and secondly that they don't have any more writedowns this year, which is not likely.  Last year the finding costs were in the $50-60 per BOE range if I recall correctly.  High 20's per BOE is a realistic number for this exercise. 

Hope this makes sense. 
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 03, 2015, 09:21:22 PM
"I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help."

Oh really?

They sold two weeks ago a so-so asset at $43,000 per boe/d for which the buyers and financiers, I am sure, were all well aware of the current price desk.

And somehow we should believe your analysis that what is left or 86,000 boe/d, the Duvernay, other land/reserves is not even worth the debt or $1.75 billion or $20,350 per boe/d?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 03, 2015, 09:55:49 PM
"I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help."

Oh really?

They sold two weeks ago a so-so asset at $43,000 per boe/d for which the buyers and financiers, I am sure, were all well aware of the current price desk.

And somehow we should believe your analysis that what is left or 86,000 boe/d, the Duvernay, other land/reserves is not even worth the debt or $1.75 billion or $20,350 per boe/d?

Cardboard

I have my eyes on a 54K core production producing in CAD$ with ratios among the best in the 3 core areas with all non-core assets sold or to be sold, debt at 1B max and literally world class shareholder management in an environment that realizes that it overreacted. All this for the price of cheap option...
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 04, 2015, 07:26:37 AM
We said the hard sales are over - not that there should be no further sales.
Their debt/boe flowing is now less than their peers, & they are in a more equal negotiating position than they were.

Practical well economics is a payback exercise, not an NPV one.
We have no idea what the price, or cost, deck will be six months out - let alone 40 years. Same thing for the discount rate or the expected well life.
And we know, with certainty, that both are going to change over the life of the well.
BS analysis.

If you can get the cost back before the loan comes due - you drill (US shale). If you had to hi-grade to do it, you will be in surplus - but not for very long. Drill normally & you could be in surplus for some time. A better field has a higher total upfront cost, with lower upfront cost/boe flowing costs, & a longer life. You get what you pay for.

Real production varies by year, according to economic conditions; maintenance capex is just analyst convention.
At higher prices the well next to mine becomes economic again, & is no longer shut-in; production from zero capex. If my SCFP tolerates it, it may also be cheaper to buy versus drill; expansion/contraction from unpredictable capex.
More BS analysis.

Resource modeling is not the same as forecasting factory production.
Use the wrong model & you will get burned.

SD

Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on October 04, 2015, 08:41:54 AM
"I ran their production profile at the current price deck and their is no value left over for equity holders.  Asset sales won't help."

Oh really?

They sold two weeks ago a so-so asset at $43,000 per boe/d for which the buyers and financiers, I am sure, were all well aware of the current price desk.

And somehow we should believe your analysis that what is left or 86,000 boe/d, the Duvernay, other land/reserves is not even worth the debt or $1.75 billion or $20,350 per boe/d?

Cardboard

Don't believe me, believe the math. 

If they could get $43,000 per boe/d they should sell everything and pay shareholders back.  If you take that flowing BOE number and divide it by their current netbacks of $15/boe.  That means it would take the purchaser 2867 days or 7.9 years to get their investment back.  Actually it would take closer to 12 years for the acquirer to get their cash back because the production rate would decline over time. 

Don't shoot the messenger when reality sucks. 

Now lets look at the $20,000 per boe/d number.  Divide this by the current netbacks of $15 per boe and you get 1333 days or 3.7 years.  The purchasing company may be able to squeeze out some more operational efficiencies and increase the net netbacks marginally to make this a three year payback.  That's a good rule of thumb in most industries. 

A few more things. 
1) Netbacks.  With Edmonton Mixed Sweet back down to $CAD 57/boe.  Their netbacks will be $10/boe lower than last quarter, which was $18/boe.  Their hedges will make some of that back so lets call it around $12/boe.  This makes the math even worse. 

2) Don't get too excited about land.  Most of it will expire worthless.  I include all land value at cost in my asset value calculations.  The problem with land is that everyone's got it and in this price environment most land is a liability, not an asset.  It makes companies do stupid things like drilling just to retain land.  You may laugh at that but I can point to regulatory filings where that is stated.  The problem is nobody reads the regulatory filings. 

3) Every well always has been and always will be a NPV exercise.  Every company plasters their presentations with half cycle IRR's of 40, 50, 100%.  I guess nobody every looks at the reserve reports either.  Reserve reporting always has been an NPV exercise too.  Here's the kicker, the payback period CANNOT be calculated without an estimate of the cash flow stream for the first few years.  Payback period is a function of the cash flow stream, not the other way around. 

Now watch the guns come out again. 
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on October 04, 2015, 09:23:08 AM
Hey kevin4u2, it sounds like you've put a lot of thought and effort into this. It's clear you would not invest in PWE, but are there others in the sector that you feel very good about? And if so, why do you like them so much?

Cheers!
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 04, 2015, 10:26:12 AM
Just to put it to rest.

Nobody claimed that you did not need to estimate future CF to determine payback.
What you are missing is that near-term CF estimates are far less uncertain than long term ones. If the proposed well cannot repay its loan within 12 months - it does not get drilled. Bankers are cutting back credit lines. They either do not want to lend to you - or want their cash back within 12 months; not your sniveling debt service payment instead.

Reserve reports assume going concern, & development over many years. You are assuming immediate liquidation (If they could get $43,000 per boe/d they should sell everything and pay shareholders back).  This is also oil/gas, not other industries (make this a three year payback.  That's a good rule of thumb in most industries). Apples to oranges comparisons.

The biggest assets on a mutual funds SCFP is capitalised deferred sales commission (DSC). By your approach, an investor should simply buy enough of a mutual fund to control it; then force either a liquidation, or a resale to monetize the DSC. Big $ out for small $ in.

It does not happen, because its a long term high margin business.
Oil/Gas is the same.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 04, 2015, 04:03:31 PM
It sounds to me Kevin4u2 that you are saying that the entire oil & gas sector sucks and that people are still willing to pay very high prices for it. Similar to Einhorn's claim.

I do read reserve reports and know recycle ratios and my own claim is the following: the vast majority of NA oil & gas producers are bankrupt/should halt most operations if prices remain as is over the long term (10 years). Those that would be able to make it would have a much smaller production base. So unless oil demand drops dramatically this scenario is highly improbable hence prices have to rebound to a higher level meaning that Q2 or coming Q3 netbacks are abnormal and should not be used to forecast the future.

What I can do however is to look at prices paid for assets by parties at  arm's length under very difficult circumstances and be able to conclude that PWT remaining assets are worth a lot more than the debt or $20,350 boe/d. Based on many data points, $40,000 per boe/d does not seem far fetched at all. So that is my liquidation/bankruptcy value or $3.25 a share. From $0.85, that leaves a lot of margin of safety.

How much is it going to be worth in the future once they pay more debt and focus mostly on their 3 core plays? Then I also have to conclude that it should approach other players with similar assets and strategy. This team is not opposed to cost cutting or looking at peers for better techniques. Once the cleanup, write-downs are done, then costs, recycle ratio and other measures should also be close to peers. That is a 5 to 20 bagger from here based on how things unfold.

So what part of that reality sucks for the longs?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 04, 2015, 07:03:52 PM
Now, I must point out the following correction:

In H1, PWT produced 93,024 boe/d or 16,837,344 boe.

The revised guidance for 2015 following the sale of Mitsue and Weyburn as of July 1 which were 4,500 boe/d and 2,500 boe/d respectively is 84,000 - 88,000 boe/d.

So assuming the mid-point or 86,000 boe/d for 2015, they need to produce a further: (86,000 x 365) - 16,837,344 = 14,552,656 boe. In H2 or over the last 184 days of 2015, that is 79,090 boe/d.

Hence following these two sales, net debt to current or on-going flowing boe/d is really: $1.75 billion / 79,000 boe/d = $22,150 boe/d.

So this hurts the math on PWT a bit but, here is the more interesting part:

In Q1, PWT produced 94,905 boe/d.
In Q2, PWT produced 91,164 boe/d explained by the sale of 1,000 boe/d in non-core assets and shut-in of 2,000 boe/d of uneconomical production.

Therefore, how do we go down from 91,164 boe/d to 79,090 boe/d or a 12,000 boe/d reduction by just selling 7,000 boe/d of non-core assets and reducing yearly capex from $625 million down to $500 million? There is 5,000 boe/d that cannot be explained by decline rates alone IMO.

Is there still something left to be disclosed like what happened with the Waskada assets? Per the Annual Information Form, they had 458 net producing oil wells in Manitoba as of December 31, 2014. This had to be a roughly 4,000 boe/d producing asset. It cannot be explained IMO by the 1,000 boe/d sale in Q2.

Or are they forecasting more shut-ins for H2?

Cardboard

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 04, 2015, 08:05:14 PM
Very good catch, & 50/50 either way.

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 05, 2015, 12:47:54 AM
Wow, it's up 23% after being flat for most of the morning.  Delayed reaction to yesterday's news?

Mister market is efficient  ;D

Interesting..
This is more qualitative to me
Been reading the weekend more stuff on the qualitative side..I pulled partial trigger at C$0.67..BUT still looking to whether to go big..

This seems to me either:
1. the restriction was lifted for the insiders. no more sales at the moment, no mou's
2. someone big got in, the restriction could be still on...

Canada
Avg Vol (3m): 2,140,210
Friday Volume: 5,163,657

USA
Avg Vol (3m):   3,082,740
Friday Volume:   10,468,284
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 05, 2015, 02:15:57 PM
A bump from the SU/COS news. 

Other than the actual product PWT and COS are comparable in size.  COS pumps 15% more, and has 15% more debt.  $ 51000 per flowing barrel. 

COS has 2.4 B in debt.  Suncor is offering 4.3 B for COS in a share exchange that would take all of COS including the debt.  My guess is they will be pressed higher to get it through.

A similar offer for PWt gets us to 8.00 per share.  Obviously there are differences in each set of assets.  Both have merits and problems. 
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 05, 2015, 05:29:29 PM
A bump from the SU/COS news. 

Other than the actual product PWT and COS are comparable in size.  COS pumps 15% more, and has 15% more debt.  $ 51000 per flowing barrel. 

COS has 2.4 B in debt.  Suncor is offering 4.3 B for COS in a share exchange that would take all of COS including the debt.  My guess is they will be pressed higher to get it through.

A similar offer for PWt gets us to 8.00 per share.  Obviously there are differences in each set of assets.  Both have merits and problems.

CALGARY – One of Canadian Oil Sands Ltd.’s largest shareholders has vowed to go to court rather than accept Suncor Energy Inc.’s $4.3-billion hostile takeover bid.

“It’s not a low-ball offer, it’s a no-ball offer,” said Seymour Schulich, a Canadian billionaire who owns 25 million shares, or five per cent, of Canadian Oil Sands. “The bid is ridiculous.”

Suncor, Canada’s largest energy company, revealed Monday it had approached Canadian Oil Sands management twice in the spring about a deal, but had been rebuffed at a higher price. Its unsolicited all-share bid would represent a total deal value of $6.6 billion, including debt.

Schulich said that proposal is worth less than half the replacement value of the Syncrude Canada Ltd. joint venture, of which Canadian Oil Sands owns 37 per cent. That stake in Syncrude is Canadian Oil Sands’ only asset.

As a comparison, Shulich noted that Imperial Oil Ltd. recently built the Kearl oilsands mining project at a cost of $13 billion, which produces lower-grade oil than the Syncrude project.

“I ain’t selling at that price,” he said of Monday’s bid, adding that he believes Canadian Oil Sands is worth $20 per share. “If they succeed, I’ll go to court to get a valuation.”
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 05, 2015, 05:50:36 PM
He is talking tough but, you have to decide about dissenting before you vote or seeing if they succeed:

“If they succeed, I’ll go to court to get a valuation.”

Anyway, I think that Suncor made an opportunistic bid with COS shares right at the bottom but, they are kind of trapped.

Syncrude is their only asset and look at the list of partners:

http://www.syncrude.ca/about-syncrude/ownership-and-investors/

The only other potential bidder is Imperial Oil since the others are Chinese owned (Sinopec and Nexen) and a bid would likely get turned down by the Canadian Government no matter who wins the election IMO and others are too small or not likely to bid.

The other problem for an Imperial bid is that they would end up with 62% of the joint venture or a majority while Suncor ends up with 49%. There could be special rules in the joint-venture agreement protecting minority owners.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on October 05, 2015, 07:45:52 PM
Hey kevin4u2, it sounds like you've put a lot of thought and effort into this. It's clear you would not invest in PWE, but are there others in the sector that you feel very good about? And if so, why do you like them so much?

Cheers!

I have been looking but haven't found much if anything that makes sense today.  People on here think these companies are worth $40-50,000 per flowing barrel but that would require higher prices.  I remember back before the oil bull run, 2000-2002, most oil companies sold for $25,000 per flowing barrel.  That was the norm so I don't get excited when people balk.  I've seen this rodeo before.  When every one on this forum begin throwing in the towel, it will be time to step up.  I'm with Gary Shilling, oil will likely go down to sub $30/boe before this cycle is over.  This is well below the full cycle cost but in times like this it comes down to the marginal cost of production (the rest is sunk) which is in the $10-20/boe range.  So long as the production is cash flow positive they will keep pumping (they really have no choice).  Someone will blink first, or the bankruptcies will start. 

As for what I like.  I want to own the lowest cost producer, period, end of story.  That is the ONLY competitive advantage in a price taking industry such as oil and gas.  This mean two things, 1) I don't like O&G investing and 2) I like Peyto.  They have consistently been profitable for 16 years through a wide range of industry conditions.  Consistent profit margins.  Listen to their presentation at the Peter's conference a couple weeks ago and you'll get a good feel for what they are about, shareholder returns.  They have actually delivered those

So many of these oil and gas companies are a complete waste of time.  If you handed just the financial statements (with a name attached) to anyone who understands what they mean, they would tell you they are terrible businesses.  Peyto is a breath of fresh air in that they are actually profitable.  I also owned BXE earlier this year, make a quick buck but sold before NG tanked again.  I do not currently own any BXE shares.  I would like to see demonstration of the BXE story before committing to that name.  The predecessor to BXE was not a outstanding company.  I would also like to see a solid $3/mcf AECO gas price before investing.  The great thing about investing is that you do not have to invest in O&G.  I mean, I was reflecting the other day... Coke prices have consistently been going one direction for a long, long time. 

If you look at NG prices in Canada, they are selling for the marginal cost of production, around $2.5-3/mcf.  I can't comment on the US since I don't know those numbers for sure.   On a full cycle basis, NG has to be $5/mcf for the Canadian NG industry to make sense.  The current oil shale revolution happened 8 years ago in the NG business (shale gas).  Those interested should study what happened to the NG sector since then, but anyway.  With AECO gas prices at $2.60/mcf as of today, Peyto is at breakeven on a full cycle basis.  What does that mean for other NG producers?  Not good.  I would like to buy PEY but at a lower price, but this is the PWE thread so I better stop here.  Cheers!
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 05, 2015, 08:16:11 PM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 05, 2015, 08:43:31 PM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?
Title: Re: PWE - Penn West Petroleum
Post by: Green King on October 05, 2015, 10:45:26 PM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?

This forecast seems like a reasonable conclusion. Since that is what happened to fiber optics and any other business that depends on CapEx and has no moat. I don't know this is the same situation since there is a cartel aspect to this industry.   
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 05, 2015, 11:33:54 PM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?

This forecast seems like a reasonable conclusion. Since that is what happened to fiber optics and any other business that depends on CapEx and has no moat. I don't know this is the same situation since there is a cartel aspect to this industry.


How do you make up for 6% decline rate worldwide (6m bow) + a loss of 1 m barrel na prod this year with the costs explained in the graph above (20000 data points across the world) in the next future with 10-20$ marginal costs barrels is difficult to explain I think...
Title: Re: PWE - Penn West Petroleum
Post by: Green King on October 05, 2015, 11:58:51 PM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?

This forecast seems like a reasonable conclusion. Since that is what happened to fiber optics and any other business that depends on CapEx and has no moat. I don't know this is the same situation since there is a cartel aspect to this industry.


How do you make up for 6% decline rate worldwide (6m bow) + a loss of 1 m barrel na prod this year with the costs explained in the graph above (20000 data points across the world) in the next future with 10-20$ marginal costs barrels is difficult to explain I think...

I think i wasn't wording it correctly. I meant it was a reasonable possibility. The future is not a singular outcome event it's more a multiple of possible event. That is one of the possible event since it has happened with other industries. But different from other industries in one way since there is a cartel involved. So there might be something similar with a different flavor.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 06, 2015, 12:03:33 AM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?

This forecast seems like a reasonable conclusion. Since that is what happened to fiber optics and any other business that depends on CapEx and has no moat. I don't know this is the same situation since there is a cartel aspect to this industry.


How do you make up for 6% decline rate worldwide (6m bow) + a loss of 1 m barrel na prod this year with the costs explained in the graph above (20000 data points across the world) in the next future with 10-20$ marginal costs barrels is difficult to explain I think...

I think i wasn't wording it correctly. I meant it was a reasonable possibility. The future is not a singular outcome event it's more a multiple of possible event. That is one of the possible event since it has happened with other industries. But different from other industries in one way since there is a cartel involved. So there might be something similar with a different flavor.

Understood, I am not saying he is crazy and he may be right at some point (???), or he likes the publicity? But given the current data unless consumption totally falls off a cliff, it seems he is going to have to wait for that to become a reality with some degree of persistence. I feel that his predictive abilities are much better with treasuries to be honest.
Title: Re: PWE - Penn West Petroleum
Post by: Green King on October 06, 2015, 12:18:59 AM
I cannot see a marginal cost of production at 10-20$/boe in a graph like this: http://www.rystadenergy.com/AboutUs/NewsCenter/PressReleases/global-liquids-supply-cost-curve ?

Gary Shilling was actually bullish on NA energy producers in 2012 and a little after that. I think many of his deflation claims have value (I actually like FFH at the moment) and he has been right with 30y bonds for decades. He seems confused on plenty of other points and has had to explain disastrous forecasts many times over (like in 2013 for 2012). I wonder how much of his career is based on buying 30y treasuries?

This forecast seems like a reasonable conclusion. Since that is what happened to fiber optics and any other business that depends on CapEx and has no moat. I don't know this is the same situation since there is a cartel aspect to this industry.


How do you make up for 6% decline rate worldwide (6m bow) + a loss of 1 m barrel na prod this year with the costs explained in the graph above (20000 data points across the world) in the next future with 10-20$ marginal costs barrels is difficult to explain I think...

I think i wasn't wording it correctly. I meant it was a reasonable possibility. The future is not a singular outcome event it's more a multiple of possible event. That is one of the possible event since it has happened with other industries. But different from other industries in one way since there is a cartel involved. So there might be something similar with a different flavor.

Understood, I am not saying he is crazy and he may be right at some point (???), or he likes the publicity? But given the current data unless consumption totally falls off a cliff, it seems he is going to have to wait for that to become a reality with some degree of persistence. I feel that his predictive abilities are much better with treasuries to be honest.

I don't think anyone's predicative ability is worth anything. If someone can predict the future of anything with great accuracy he or she would own the world by now. Its more about knowing the possible outcomes and being sure you're not fatally hurt by it and compensated correctly for taking on the risk.

fyi The cartel can just make an announcement tomorrow and everything will change.
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 06, 2015, 03:04:38 AM
http://www.themarketbusiness.com/2015-10-05-penn-west-petroleum-short-interest-down-14-5-in-september-pwe
West Petroleum (NYSE:PWE) was the target of a large decrease in short interest during the month of September. As of September 15th, there was short interest totalling 16,875,846 shares, a decrease of 14.5% from the August 31st total of 19,733,068 shares, MarketBeat.com reports. Currently, 3.4% of the company’s stock are short sold. Based on an average trading volume of 3,357,453 shares, the short-interest ratio is currently 5.0 days.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 06, 2015, 07:31:48 AM
"People on here think these companies are worth $40-50,000 per flowing barrel but that would require higher prices.  I remember back before the oil bull run, 2000-2002, most oil companies sold for $25,000 per flowing barrel."

Speaking for myself, I don`t think anything. I simply observe multiples being paid by market participants. Those that are closest to the well head, sell that product everyday at spot or on the forward curve and are capable to finance their investment via equity, debt or other means and think that they can earn a return on top of it. I think that these people are more capable than I am to determine what is the value of these assets. 

In 2000-2002, it was before the oil bull run. Today, I think that we can call it following a crash or what must now be close to a bottom. Global demand back then was 77 million barrels a day. Today it is 94 million. Since then we have had inflation, a depletion of cheap barrels to extract and much higher finding and development costs. So maybe that this increase in the multiple that they are willing to pay or from $25,000 to $40,000-$50,000 is justified.

"So long as the production is cash flow positive they will keep pumping (they really have no choice).  Someone will blink first, or the bankruptcies will start."

You are right, they will keep pumping from their existing, completed wells since operating costs are in the $10-$20 a barrel range. However, we are seeing that this does not suffice to maintain production at current level: down over 5% in the U.S. alone in just 5 months. We need new wells being drilled and completed and with less easy capital available it is simply not happening. And bankruptcies won`t change that since it simply means shareholders losing their ownership to banks and bond holders who are already applying their restructuring plan at distressed firms. 
 
Now regarding a macro bet based on the wisdom of Gary Shilling, then I think it is a discussion for another thread.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 06, 2015, 08:37:43 AM
Another asset sale, this time by Pengrowth Energy:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aPGF-2315730&symbol=PGF&region=C

At these metrics, PWT shares are worth just over $2 on boe/d basis and around $3.50 on 2P reserves.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 06, 2015, 09:03:55 AM
I am not sure shale is going to help Gary's predictions: http://gulfnews.com/business/sectors/energy/shale-oil-pioneer-sees-dramatic-decline-in-us-output-growth-1.1596166
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 06, 2015, 09:48:48 AM
"People on here think these companies are worth $40-50,000 per flowing barrel but that would require higher prices.  I remember back before the oil bull run, 2000-2002, most oil companies sold for $25,000 per flowing barrel."

Speaking for myself, I don`t think anything. I simply observe multiples being paid by market participants. Those that are closest to the well head, sell that product everyday at spot or on the forward curve and are capable to finance their investment via equity, debt or other means and think that they can earn a return on top of it. I think that these people are more capable than I am to determine what is the value of these assets. 

In 2000-2002, it was before the oil bull run. Today, I think that we can call it following a crash or what must now be close to a bottom. Global demand back then was 77 million barrels a day. Today it is 94 million. Since then we have had inflation, a depletion of cheap barrels to extract and much higher finding and development costs. So maybe that this increase in the multiple that they are willing to pay or from $25,000 to $40,000-$50,000 is justified.

"So long as the production is cash flow positive they will keep pumping (they really have no choice).  Someone will blink first, or the bankruptcies will start."

You are right, they will keep pumping from their existing, completed wells since operating costs are in the $10-$20 a barrel range. However, we are seeing that this does not suffice to maintain production at current level: down over 5% in the U.S. alone in just 5 months. We need new wells being drilled and completed and with less easy capital available it is simply not happening. And bankruptcies won`t change that since it simply means shareholders losing their ownership to banks and bond holders who are already applying their restructuring plan at distressed firms. 
 
Now regarding a macro bet based on the wisdom of Gary Shilling, then I think it is a discussion for another thread.

Cardboard

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.

The various recent sales are suggesting that Penn West is worth much more than 65 or 80 cents per share.  It doesn't look like it is going into restructuring either.  So that makes it a relatively safe bet.  Not something I want to bet the farm on , but a low risk bet with a high potential return. 

The pumping assets of PWT are worth at least the value of COS, especially considering the tar sands political football. 

Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 06, 2015, 02:14:22 PM
Another asset sale, this time by Pengrowth Energy:

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aPGF-2315730&symbol=PGF&region=C

At these metrics, PWT shares are worth just over $2 on boe/d basis and around $3.50 on 2P reserves.

Cardboard

That's heavy crude btw, so the per flowing is at a discount. This is nice. Very nice.
Title: Re: PWE - Penn West Petroleum
Post by: sculpin on October 06, 2015, 04:02:14 PM
Libya & Brazil & Chinese demand oh my

With thanks to members of the IV BRY board....http://www.investorvillage.com/smbd.asp?mb=4288&mn=203901&pt=msg&mid=15360575

U.S. oil output on brink of "dramatic" decline, executives say

Oct 6 2015, 15:28 ET | By: Carl Surran, SA News Editor 

Oil industry execs speaking at the Oil and Money conference in London warn of a "dramatic" decline in U.S. production that could pave the way for a future spike in prices if fuel demand increases.

Libya's oil output down to 300,000 bpd
Oct 5 (Reuters) - Libya's oil production has dropped to 300,000 barrels per day, less than a quarter of what it produced before the 2011 fall of Muammar Gaddafi, mostly because of insecurity and closed pipelines, a top official said.
http://www.reuters.com/article/2015/10/05/libya-energy-idUSL8N12536220151005

Oct 5 (Reuters) - State-controlled Petróleo Brasileiro SA , struggling with the biggest debt load among global oil firms, on Monday cut capital spending plans for this year and next by $11 billion in the wake of a slump in Brazil's currency and in oil prices.
In a securities filing, the company, commonly known as Petrobras, said planned investments will be cut to $25 billion and $19 billion for 2015 and 2016, respectively, from $28 billion and $27 billion previously. Budgeted costs plus operating expenses excluding purchases of raw materials were trimmed for this year and next as well, the filing said.

WoodMac also had a blog entry this morning about why Chinese oil demand is holding:
 
Analysing each oil product and exploring the drivers for each product, we find that gasoline, aviation fuel, and chemical feedstock related products such as LPG and naphtha are expected to grow robustly due to China's growing need for consumption-oriented products.
 
Specifically, we estimate that around 90% of oil demand growth will stem from consumer-related oil products this year, underpinned by rising household income and urbanisation. China's growing middle class will drive the demand for consumer related oil products – of that there is no doubt.

Notably, we have seen growth in air passenger traffic expand at a pace of almost 15% in the first seven months of this year compared to the same period in 2014. As such, our view of jet fuel remains optimistic and demand is expected to expand just over 13% through the rest of 2015.

http://www.woodmac.com/analysis/oil-demand-China
 
I am not sure when we gonna finish with the media message that Chinese oil demand is slowing, if anything Chinese oil demand is accelerating compared to last year (unlike other commodities):
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 06, 2015, 07:14:47 PM
Just keep in mind that while very positive, this is primarily 2016 stuff.
We still have to get through the Q3 earnings report in 2-3 weeks  ;)

SD
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 07, 2015, 07:24:45 AM
"People on here think these companies are worth $40-50,000 per flowing barrel but that would require higher prices.  I remember back before the oil bull run, 2000-2002, most oil companies sold for $25,000 per flowing barrel."

Speaking for myself, I don`t think anything. I simply observe multiples being paid by market participants. Those that are closest to the well head, sell that product everyday at spot or on the forward curve and are capable to finance their investment via equity, debt or other means and think that they can earn a return on top of it. I think that these people are more capable than I am to determine what is the value of these assets. 

In 2000-2002, it was before the oil bull run. Today, I think that we can call it following a crash or what must now be close to a bottom. Global demand back then was 77 million barrels a day. Today it is 94 million. Since then we have had inflation, a depletion of cheap barrels to extract and much higher finding and development costs. So maybe that this increase in the multiple that they are willing to pay or from $25,000 to $40,000-$50,000 is justified.

"So long as the production is cash flow positive they will keep pumping (they really have no choice).  Someone will blink first, or the bankruptcies will start."

You are right, they will keep pumping from their existing, completed wells since operating costs are in the $10-$20 a barrel range. However, we are seeing that this does not suffice to maintain production at current level: down over 5% in the U.S. alone in just 5 months. We need new wells being drilled and completed and with less easy capital available it is simply not happening. And bankruptcies won`t change that since it simply means shareholders losing their ownership to banks and bond holders who are already applying their restructuring plan at distressed firms. 
 
Now regarding a macro bet based on the wisdom of Gary Shilling, then I think it is a discussion for another thread.

Cardboard

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.


Well said - there is a reason for being distressed.
I am kind of, a little bit, regretting of not pulling the trigger big :)
My bull case is more qualitative Management vs oil prices, specially Chairman
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 07, 2015, 07:34:15 AM
http://finance.yahoo.com/echarts?s=PWT.TO+Interactive#{"showMfi":true,"showRsi":true,"range":"5d","allowChartStacking":true} (http://finance.yahoo.com/echarts?s=PWT.TO+Interactive#{"showMfi":true,"showRsi":true,"range":"5d","allowChartStacking":true})

Pfff 120% in 5 days, for now
I am now thinking someone might be loading and will initiate a bid to acquire it / sell it to someone else
Love this learning and patience patience
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 07, 2015, 01:24:44 PM
"People on here think these companies are worth $40-50,000 per flowing barrel but that would require higher prices.  I remember back before the oil bull run, 2000-2002, most oil companies sold for $25,000 per flowing barrel."

Speaking for myself, I don`t think anything. I simply observe multiples being paid by market participants. Those that are closest to the well head, sell that product everyday at spot or on the forward curve and are capable to finance their investment via equity, debt or other means and think that they can earn a return on top of it. I think that these people are more capable than I am to determine what is the value of these assets. 

In 2000-2002, it was before the oil bull run. Today, I think that we can call it following a crash or what must now be close to a bottom. Global demand back then was 77 million barrels a day. Today it is 94 million. Since then we have had inflation, a depletion of cheap barrels to extract and much higher finding and development costs. So maybe that this increase in the multiple that they are willing to pay or from $25,000 to $40,000-$50,000 is justified.

"So long as the production is cash flow positive they will keep pumping (they really have no choice).  Someone will blink first, or the bankruptcies will start."

You are right, they will keep pumping from their existing, completed wells since operating costs are in the $10-$20 a barrel range. However, we are seeing that this does not suffice to maintain production at current level: down over 5% in the U.S. alone in just 5 months. We need new wells being drilled and completed and with less easy capital available it is simply not happening. And bankruptcies won`t change that since it simply means shareholders losing their ownership to banks and bond holders who are already applying their restructuring plan at distressed firms. 
 
Now regarding a macro bet based on the wisdom of Gary Shilling, then I think it is a discussion for another thread.

Cardboard

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.


Well said - there is a reason for being distressed.
I am kind of, a little bit, regretting of not pulling the trigger big :)
My bull case is more qualitative Management vs oil prices, specially Chairman

There were too many unknowns to pull the trigger in a big way.  Up until 10 days ago this could have gone either way.  No sense beating yourself up over it.  I have pulled the trigger big on things that have gone bad and really regretted it (more than once). 
Title: Re: PWE - Penn West Petroleum
Post by: kevin4u2 on October 07, 2015, 06:58:30 PM

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.


Well said - there is a reason for being distressed.
I am kind of, a little bit, regretting of not pulling the trigger big :)
My bull case is more qualitative Management vs oil prices, specially Chairman

You regret (in hindsight) for not speculating on oil prices, which happened to move 8% in a matter of days... do you consider this to be rational behavior?  Do you really think that the recent price move confirms your skill and analysis, or is it really luck?  Why doesn't the qualitative analysis of management show up in the financial statements? 

To clear up the misunderstanding, I am not looking for the perfect investment, there is no such thing.  I am looking for a rational, sound investment selling at a discount.  If I don't understand it, I will not invest.  If what your saying is that I don't like to speculate, yes, you are correct. 

Here are some Buffett quotes on the value investment style.

"In the business world, the rearview mirror is always clearer than the windshield."

"I have no idea on timing. It’s easier to tell what will happen than when it will happen."

“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”

"Risk comes from not knowing what you're doing."

"There seems to be some perverse human characteristic that likes to make easy things difficult."

“Never invest in a business you can’t understand.”

"You only have to do a very few things right in your life so long as you don’t do too many things wrong."

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

"I don't look to jump over seven-foot bars; I look around for one-foot bars that I can step over."

“Only when you combine sound intellect with emotional discipline do you get rational behavior.”

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact"
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 08, 2015, 12:02:21 AM

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.


Well said - there is a reason for being distressed.
I am kind of, a little bit, regretting of not pulling the trigger big :)
My bull case is more qualitative Management vs oil prices, specially Chairman

You regret (in hindsight) for not speculating on oil prices, which happened to move 8% in a matter of days... do you consider this to be rational behavior?  Do you really think that the recent price move confirms your skill and analysis, or is it really luck?  Why doesn't the qualitative analysis of management show up in the financial statements? 

To clear up the misunderstanding, I am not looking for the perfect investment, there is no such thing.  I am looking for a rational, sound investment selling at a discount.  If I don't understand it, I will not invest.  If what your saying is that I don't like to speculate, yes, you are correct. 

Here are some Buffett quotes on the value investment style.

"In the business world, the rearview mirror is always clearer than the windshield."

"I have no idea on timing. It’s easier to tell what will happen than when it will happen."

“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”

"Risk comes from not knowing what you're doing."

"There seems to be some perverse human characteristic that likes to make easy things difficult."

“Never invest in a business you can’t understand.”

"You only have to do a very few things right in your life so long as you don’t do too many things wrong."

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

"I don't look to jump over seven-foot bars; I look around for one-foot bars that I can step over."

“Only when you combine sound intellect with emotional discipline do you get rational behavior.”

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact"

I am well aware of all this. I know it is a speculation. I would say a partial speculation to be honest because of qualitative metrics which are subjective think. Hell even intrinsic value is abit subjective, not too much though.
Remember that Buffett/Munger said that qualitative things specially management do not always show up on financial statement. It is rare though! In this case why?
1. they needed time since 2013H2
2. oil prices went down in meantime
3. they need more time now

I am not beating myself but A LITTLE BIT regret it. Just sharing for better discussion and so we can learn. It is after all risk, true, and if one doesnt take, then one cannot gain. My choice was rational:
1. to keep extra powder; the most important thing for me
2. i dont know how long the oil prices will stay at this or lower level
BUT I STILL think that the qualitative aspects of the management (their experience, relations with financial institutions and all that) is the necessary staying power. Just a non-quantitative metric :)
Also, please remember how Buffett invested in his early days. Take the AMEX exposure. Take many of his big bets and not necessarily moat based investments. What you said, I perfectly agree and this is ESPECIALLY correct for larger money. I think there is a bit of recency bias if you will when referring to Buffett and co., he did not invest like this all his life and the majority of the writings and books are all to the lets say 2nd part of BRK. But this is another thread. So, I'll stop.

As I said I sort of agreed with SD (e.g. $0.5..-> goes to $1..what do you lose..take the profit..)

My point, to learn from our diversity and difference in opinion/perspective.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 08, 2015, 04:32:17 AM

Well said.  I think there is some confusion on this thread related to investment styles.  We who have bought recently see more value than was being accorded by the market.  Kevin42u is looking at the perfect oil and gas investment and Penn West comes up deficient in this regard.  It wouldn't be so cheap if it wasn't deficient.


Well said - there is a reason for being distressed.
I am kind of, a little bit, regretting of not pulling the trigger big :)
My bull case is more qualitative Management vs oil prices, specially Chairman

You regret (in hindsight) for not speculating on oil prices, which happened to move 8% in a matter of days... do you consider this to be rational behavior?  Do you really think that the recent price move confirms your skill and analysis, or is it really luck?  Why doesn't the qualitative analysis of management show up in the financial statements? 

To clear up the misunderstanding, I am not looking for the perfect investment, there is no such thing.  I am looking for a rational, sound investment selling at a discount.  If I don't understand it, I will not invest.  If what your saying is that I don't like to speculate, yes, you are correct. 

Here are some Buffett quotes on the value investment style.

"In the business world, the rearview mirror is always clearer than the windshield."

"I have no idea on timing. It’s easier to tell what will happen than when it will happen."

“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”

"Risk comes from not knowing what you're doing."

"There seems to be some perverse human characteristic that likes to make easy things difficult."

“Never invest in a business you can’t understand.”

"You only have to do a very few things right in your life so long as you don’t do too many things wrong."

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

"I don't look to jump over seven-foot bars; I look around for one-foot bars that I can step over."

“Only when you combine sound intellect with emotional discipline do you get rational behavior.”

"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact"

Good grief.  Lacking a bit of humility are we Kevin? 

All investing is speculating.  To believe otherwise is dangerous.  Kevin, no amount of analysis can protect you from the future. 

Some of the investors from this thread have been at this game, successfully, for a long time.

BTW, I think your analysis of PWT and O&G, in general, are good Kevin.  But please spare us the Buffett quotes, and the "you guys dont know anything attitude". 

Title: Re: PWE - Penn West Petroleum
Post by: frommi on October 08, 2015, 05:10:28 AM
Kevin, no amount of analysis can protect you from the future. 

Then whats the purpose of all these posts in this forum? Fight boredom?
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 08, 2015, 05:21:50 AM
Kevin, no amount of analysis can protect you from the future. 

Then whats the purpose of all these posts in this forum? Fight boredom?

to learn by sharing and discussing

Back to the programm, bold is mine. For some refreshing perspective, qualitative reading. Not new though.

"The current oil downturn is going to last four years, “may be longer,” he predicts.
http://business.financialpost.com/news/energy/rick-george-sees-a-cleansing-of-the-oil-industry-after-years-of-profligate-spending

http://calgaryherald.com/business/energy/ewart-the-incredible-shrinking-penn-west-petroleum-eyes-a-turnaround
“We are certainly aware of what the stock price has done and what it hasn’t done, more importantly,” George said in response to one shareholder

“The process of re-establishing operational credibility  … takes some time,” said Roberts, a Texan who was chief operating officer at Marathon Oil  Corp. before he took the top job at Penn West in 2013. “That’s why we’ve said we are going to be very patient and focused. We hammered on debt. We’ve hammered on operational capability and we think over time people are going to respond to that.”

https://en.wikipedia.org/wiki/Appointment_to_the_Order_of_Canada#Officer
Appointment into the Order of Canada is the process by which Canadians citizens or certain foreign persons are inducted into the Order of Canada, an act that is Canada's second highest civilian honour within the country's system of honours. Any living Canadian or foreign national may be nominated for appointment; however, the Advisory Council of the Order of Canada and the Governor General of Canada make the final decision on appointments. Members of the order may also be elevated within it if he or she has continued to provide service to Canada, or to humanity in general, after their appointment

Officer[edit]
A person can be appointed to the rank of Officer for "achievement and merit of a high degree, especially service to Canada or to humanity at large." Unlike the rank of Companion, there is no limit on how many Officers can be living at one time, though the Governor General may only appoint up to sixty-four Officers per year, excluding honorary appointments. A person can become an Officer by being promoted from the grade of Member or being appointed directly to the rank.
Member[edit]
A person can be appointed to the rank of Member for "distinguished service in or to a particular community, group or field of activity." There is no limit to how many Members can be living at one time, though the Governor General may only appoint up to 136 Members per year

https://www.gg.ca/document.aspx?id=14940
the Order of Canada is the cornerstone of the Canadian Honours System, and recognizes outstanding achievement, dedication to the community and service to the nation. The Order recognizes people in all sectors of Canadian society. Their contributions are varied, yet they have all enriched the lives of others and made a difference to this country. Since its creation, more than 6 000 people from all sectors of society have been invested into the Order.

Officer (O.C.)
Order of Canada, Officerrecognizes national service or achievement; and

Member (C.M.)
Order of Canada, Memberrecognizes outstanding contributions at the local or regional level or in a special field of activity.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 08, 2015, 05:24:50 AM
Kevin, no amount of analysis can protect you from the future. 

Then whats the purpose of all these posts in this forum? Fight boredom?

I guess I should have wrote a Donald Rumsfeld logic statement instead. 
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on October 10, 2015, 03:48:49 PM
PWE uploaded October presentation: http://pennwest.com/upload/media_element/media_file/15

Confirms net debt at 1.8B$ after recent asset dispositions, additional cost savings of 5-10% in 2016, additional 13C$/boe because of exchange rate compared to US companies, confirms separation between core and non-core production (Swan Hills is a big debt reducer probably in the recent future), won't spend more than FFO in 2016, netbacks at 22.5C$ in current environment (core production netbacks will be around 40C$/boe at 70$ WTI). While oil prices can still explore sub 40s for a while, there are many bullish signs appearing everywhere and supply/demand equation is tightening everywhere. PWE at 50c was crazy crazy cheap and still is very very cheap IMHO.
Title: Re: PWE - Penn West Petroleum
Post by: Packer16 on October 10, 2015, 04:00:39 PM
Some additions from my understanding.  The 22 is core netback (which does not include non-core assets) who still may be drilled and the numbers are based upon YTD results with an average WTI of US$54.

Packer
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 13, 2015, 06:30:02 PM
Another day, another acquisition in the Canadian oil patch: $89,000 per boe/d and $11.87 per boe of 2P reserves. And that is for liquid rich natural gas!

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aKCK-2316679&symbol=KCK&region=C

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on October 14, 2015, 12:14:33 AM
Another day, another acquisition in the Canadian oil patch: $89,000 per boe/d and $11.87 per boe of 2P reserves. And that is for liquid rich natural gas!

http://www.stockwatch.com/News/Item.aspx?bid=Z-C%3aKCK-2316679&symbol=KCK&region=C

Cardboard

Kicking Horse had impressive corporate netbacks. On a per flowing boe/d multiple, it was 8.9x on corporate netback.
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 19, 2015, 06:47:24 AM
I will add this (potential bearish) action, board member Byrdson, John:
1. Oct 15/15, sold,-200,000, $USD1.11
2. May 15/15, bought,+200,000, $USD2.08

So this is nearly $USD200,000 loss

He still should be having 503,000 shares. Bearish definitely according me, but not necessarily too much
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 25, 2015, 09:14:37 AM
We all might all want to be hedged going into the Q3 earnings announcement .....

1. Given the results that the rest of the patch have been posting - a headline loss is highly likely.
2. It will take very little to drive the price back under $US 1.00 - & institutional holders back out.
3. A SINGLE close below $US 1.00 in the next week - & the NYSE day count restarts.

May we all do well.
SD
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 25, 2015, 05:53:46 PM
I will add this (potential bearish) action, board member Byrdson, John:
1. Oct 15/15, sold,-200,000, $USD1.11
2. May 15/15, bought,+200,000, $USD2.08

So this is nearly $USD200,000 loss

He still should be having 503,000 shares. Bearish definitely according me, but not necessarily too much

Tax loss selling, perhaps.  The shares he sold were bought at much higher prices, based on first in, first out.  I have done it early in the fall to offset other gains. 
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 25, 2015, 06:16:34 PM
We all might all want to be hedged going into the Q3 earnings announcement .....

1. Given the results that the rest of the patch have been posting - a headline loss is highly likely.
2. It will take very little to drive the price back under $US 1.00 - & institutional holders back out.
3. A SINGLE close below $US 1.00 in the next week - & the NYSE day count restarts.

May we all do well.
SD

I am missing something.  Who in Canada has reported?  I ran through at least 20 I know of and their all upcoming still. 

But your point is taken.  Results are likely to look weak.  That may trigger tax loss selling.... the price had points since Jan. when it was above $3.00 CDN.  There may be a good reload opportunity coming up. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 25, 2015, 06:41:43 PM
PD, Mullen, & a good chunk of the (mostly) US O/G service industry.

Beyond the obvious, the common theme has been IFRS driven impairment write-downs on equipment (PV of future revenue no longer able to support capitalized cost). In addition to regular business, this quarter PWE will have lay-off costs, possibly some losses on the recent asset sales, & quite likely some similar IFRS impairment write-downs on any shut in production. Kitchen sink quarter.

Not the end of the world, but hard to justify the current price.

SD

 
Title: Re: PWE - Penn West Petroleum
Post by: influx on October 26, 2015, 03:51:13 AM
Not the end of the world, but hard to justify the current price.

SD

Meaning? You expect lower or higher price given the Q3 financials? What exactly do you expect please? :)
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on October 26, 2015, 08:13:17 AM
PD, Mullen, & a good chunk of the (mostly) US O/G service industry.

Beyond the obvious, the common theme has been IFRS driven impairment write-downs on equipment (PV of future revenue no longer able to support capitalized cost). In addition to regular business, this quarter PWE will have lay-off costs, possibly some losses on the recent assets sales, & quite likely some similar IFRS impairment write-downs on any shut in production. Kitchen sink quarter.

Not the end of the world, but hard to justify the current price.

SD

 

Mullen's O&G side was certainly weak as I expected.  Trucking did very well and since this is the focus of Mullen's growth they will do well.  Any pricing improvement in the O&G division will be gravy. 

Pwt should do well in the longer term.  One caveat is that it makes up <2.5% of my investments wheres Mullen is around 10-12%. 
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on October 26, 2015, 08:39:50 AM
Meaning? You expect lower or higher price given the Q3 financials? What exactly do you expect please? :)

Longer term they should do well; not so much over the next month with short interests incentivized to beat on the piñata.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on October 26, 2015, 09:01:11 AM
Personally, I am hoping for some additional disclosure around asset sales, namely: Waskada. I would also not rule out the possibility of one more asset sale being announced with Q3 results.

I am also expecting more details on future operating costs: opex and G&A with the various sales that have been made and restructuring.

Finally, what debt maturities are now looking like, amount drawn on credit facility and what does the Fall review with bankers looks like?

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on November 02, 2015, 11:07:25 AM
Wo! What a move today!
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 02, 2015, 11:21:59 AM
Might be the coming of the announcement of a new asset deal...  ::)
Title: Re: PWE - Penn West Petroleum
Post by: elevensecsrt4 on November 02, 2015, 11:57:11 AM
I agree nice move !  I took some off the table last week ( a little too early I see )

Title: Re: PWE - Penn West Petroleum
Post by: sampr01 on November 02, 2015, 12:33:07 PM
Its not fun riding down from $5 to 0.45 and PWE was down everyday 10-20% . But like this change in direction.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 02, 2015, 12:38:30 PM
Its not fun riding down from $5 to 0.45 and PWE was down everyday 10-20% . But like this change in direction.

It was fun massively adding at 45c to 50c/share though, what a CRAZY price!
It reminds me of stocks like office depot during the crash of 2008/2009 - nuts.
I didn't go for office depot but in this precise case, Penn West, bankruptcy risks have always been remote.
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on November 02, 2015, 12:48:46 PM
move is probably from this? http://www.financialwisdomworks.com/barclays-increases-penn-west-petroleum-price-target-to-c1-00-pwt/121793/
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 02, 2015, 01:12:21 PM
Might be good to have large amounts of excess assets in this environment: http://www.bloomberg.com/news/articles/2015-11-02/price-recovery-may-follow-rise-in-global-oil-m-a-bernstein-says
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on November 02, 2015, 06:45:13 PM
Totally missed this one. Congrats to the longs.
Title: Re: PWE - Penn West Petroleum
Post by: investor-man on November 02, 2015, 07:02:47 PM
Totally missed this one. Congrats to the longs.

heh, I've still got $0.10 to go before I'm back in the black on this one.
Title: Re: PWE - Penn West Petroleum
Post by: influx on November 03, 2015, 12:08:51 AM
move is probably from this? http://www.financialwisdomworks.com/barclays-increases-penn-west-petroleum-price-target-to-c1-00-pwt/121793/

Barclays has a stake, small one though and they have an incentive too.
The price has already climbed when Barclay gave a recommendation. Perhaps to give it a floor?
Title: Re: PWE - Penn West Petroleum
Post by: influx on November 03, 2015, 12:11:37 AM
Totally missed this one. Congrats to the longs.

So, what do you think now? How are you thinking now? Would you please share more of your thoughts and why do you think you missed and how do you (rationally) feel about this?

Because as far as I remember, it was a totally rational call of yours, very quantitative, without giving anything to the qualitative side of the things. I respect that. You are safe like that and you work by rules 1 and 2 of WB :)
But I am not sure this is ride is over and PWT is out of the woods, yet.
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 03, 2015, 04:39:11 AM
Totally missed this one. Congrats to the longs.

So, what do you think now? How are you thinking now? Would you please share more of your thoughts and why do you think you missed and how do you (rationally) feel about this?

Because as far as I remember, it was a totally rational call of yours, very quantitative, without giving anything to the qualitative side of the things. I respect that. You are safe like that and you work by rules 1 and 2 of WB :)
But I am not sure this is ride is over and PWT is out of the woods, yet.

I agree.  There was nothing at all wrong wth Wilson's analysis or conclusions on a quantitative basis.  I invested in this on a qualitative basis, mostly watching management, and the BOD actions.

And, I have no reason to believe we may not see less than $1.00 Cdn again.  The probability seems lower but is not gone by any means.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on November 03, 2015, 07:06:15 AM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 03, 2015, 08:22:05 AM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

+1
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 03, 2015, 12:29:09 PM
Nawar uncovered a new package PWE just put for sale through TD: http://www.investorvillage.com/uploads/69286/files/PWTroyalties2.pdf
This company seems to have plenty of tricks left... with these assets.
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on November 03, 2015, 12:55:56 PM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

Agree with Cardboard. My mistake was to come into this with the expectations that Penn West was in distress. Through a few careless mistakes, worked my way to a fair value, and then when the non-core asset sales went through, didn't have the balls to pull the trigger on PWE when it was at $0.48. After it ran up, never bought cause I was experiencing anchoring and adjustment bias.

A few points I want to make here, PWE is doing a superb job in getting these asset sales through in an environment like this. Its cardium assets won't be worth nearly as much as Viking, so I would value that a bit lower. With relations to how I think about it now, I think Cardboard's value of $2 US is right, and it will probably get there. From then on, it's a matter of executing additional non-core until its left with 56k boe/d of production. The next phase of the investment would be hinged on commodity prices and the company's ability to execute.

BXE is another one I think Cardboard owns as well, my firm owns a chunk of BXE and expect non-core to go through first half next year. That's one I'm paying most attention to along with Gear Energy.

But I think PWE will work out fine from here, and as long as the other noncore goes through, it's a multi bagger from here... A total miss for me.
Title: Re: PWE - Penn West Petroleum
Post by: influx on November 04, 2015, 12:34:46 AM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

didn't have the balls to pull the trigger on PWE when it was at $0.48.

Why? This is the interesting bit that I would like to discuss to learn more about ourselves.

I pulled partial trigger at C$0.67
I wanted to put more, that would have been like an additional four times the previous partial trigger at C$0.67. I wanted to have the dry powder and I wanted to avoid having none. Was I scared? Did that play a thing and I am thinking is because of the dry powder? No. I wanted to show a discipline to myself. The very same reason I am sitting with this and havent sold anything yet.
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on November 04, 2015, 06:39:25 AM
Wilson-TPC,

My post was not directed at you but, at general comments around the quantitative value of Penn West. By the way the $2 figure and flowing numbers are all in CAD$.

I do own BXE but, kind of sick from the 3 round trips since late August when I got in. My issue with the company is natural gas which can't find a bottom and that is a big portion of their production.

RMP looks like a terrific pick from Packer. The upside is limited with their strong balance sheet (less upside leverage from EV/boe/d or EV/2P metrics) but, netbacks are excellent. I would not be surprised if this one gets taken out.

I also like GXE but, it seems to suffer from the same disease as TBE right now: they produce heavy oil so nobody wants to touch them. By the way, TBE is extremely cheap with netbacks similar to GXE. They are also moving to medium weighted oil with their Provost play which will improve further their profitability.

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: Jurgis on November 04, 2015, 07:52:11 AM
didn't have the balls to pull the trigger on PWE when it was at $0.48.

Why? This is the interesting bit that I would like to discuss to learn more about ourselves.

I pulled partial trigger at C$0.67
I wanted to put more, that would have been like an additional four times the previous partial trigger at C$0.67. I wanted to have the dry powder and I wanted to avoid having none. Was I scared? Did that play a thing and I am thinking is because of the dry powder? No. I wanted to show a discipline to myself. The very same reason I am sitting with this and havent sold anything yet.

When PWE was at $.48, pretty much all oil cos were in freefall and I had to balance between choosing what to buy, keeping some powder dry, and keeping myself from being scared shitless. ;)

There's always coulda-shoulda with bottoms. Very few people buy significant positions close to exact bottoms.

Have fun.
Title: Re: PWE - Penn West Petroleum
Post by: StevieV on November 04, 2015, 11:58:43 AM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

Agree with Cardboard. My mistake was to come into this with the expectations that Penn West was in distress. Through a few careless mistakes, worked my way to a fair value, and then when the non-core asset sales went through, didn't have the balls to pull the trigger on PWE when it was at $0.48. After it ran up, never bought cause I was experiencing anchoring and adjustment bias.

A few points I want to make here, PWE is doing a superb job in getting these asset sales through in an environment like this. Its cardium assets won't be worth nearly as much as Viking, so I would value that a bit lower. With relations to how I think about it now, I think Cardboard's value of $2 US is right, and it will probably get there. From then on, it's a matter of executing additional non-core until its left with 56k boe/d of production. The next phase of the investment would be hinged on commodity prices and the company's ability to execute.

BXE is another one I think Cardboard owns as well, my firm owns a chunk of BXE and expect non-core to go through first half next year. That's one I'm paying most attention to along with Gear Energy.

But I think PWE will work out fine from here, and as long as the other noncore goes through, it's a multi bagger from here... A total miss for me.

"it's a multi bagger from here... A total miss for me."  Why not invest now then?  Still anchoring or invested in other companies?
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 04, 2015, 12:08:58 PM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

Agree with Cardboard. My mistake was to come into this with the expectations that Penn West was in distress. Through a few careless mistakes, worked my way to a fair value, and then when the non-core asset sales went through, didn't have the balls to pull the trigger on PWE when it was at $0.48. After it ran up, never bought cause I was experiencing anchoring and adjustment bias.

A few points I want to make here, PWE is doing a superb job in getting these asset sales through in an environment like this. Its cardium assets won't be worth nearly as much as Viking, so I would value that a bit lower. With relations to how I think about it now, I think Cardboard's value of $2 US is right, and it will probably get there. From then on, it's a matter of executing additional non-core until its left with 56k boe/d of production. The next phase of the investment would be hinged on commodity prices and the company's ability to execute.

BXE is another one I think Cardboard owns as well, my firm owns a chunk of BXE and expect non-core to go through first half next year. That's one I'm paying most attention to along with Gear Energy.

But I think PWE will work out fine from here, and as long as the other noncore goes through, it's a multi bagger from here... A total miss for me.

"it's a multi bagger from here... A total miss for me."  Why not invest now then?  Still anchoring or invested in other companies?

3Q earnings may give another good entry point... not sure but very possible. Also 1H 2016 may be weak (global market demand still well supplied worldwide) - even though new asset sales may pop at any time; management is aggressive at marketing these assets and recent sales are a good sign that good prices can still be obtained...
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 04, 2015, 12:55:56 PM
I took some shares off the table today and in the past week.  I am speculating the earnings release to take the stock down a bit.  I still hold about 30 k shares; down from around 50 k.  Always a dicey proposition trying to out guess Mr. Market. 
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on November 04, 2015, 01:00:01 PM
I have to disagree with you guys on the quantitative.

This company is worth $2 a share under a bankruptcy/liquidation scenario. You can do the math many different ways but, based on their transactions and all the transactions made in the oil patch, that is how much they are worth at minimum or roughly $30,000 to $35,000 per boe/day. You get a similar story looking at reserves: proven, developed, undeveloped, etc.

That $2 is also before they made the sale of Weyburn and Mitsue. This changes the story a lot since they obtained a lot more than the flowing barrel numbers that I quoted above under terrible circumstances. I also described previously in this thread on where they stand now following these two sales in terms of Net debt/Produced boe/day vs their peers. They are at par.

Q3 numbers will be ugly as for most players, so this excitement in the share price that we are seeing now is likely premature. However, I firmly believe that the story is moving from survival to looking a lot more like the Whitecap's and Crescent Point's which will mean a re-rating. You can do the math comparing with them and will realize that the upside from here is huge.

Cardboard

Agree with Cardboard. My mistake was to come into this with the expectations that Penn West was in distress. Through a few careless mistakes, worked my way to a fair value, and then when the non-core asset sales went through, didn't have the balls to pull the trigger on PWE when it was at $0.48. After it ran up, never bought cause I was experiencing anchoring and adjustment bias.

A few points I want to make here, PWE is doing a superb job in getting these asset sales through in an environment like this. Its cardium assets won't be worth nearly as much as Viking, so I would value that a bit lower. With relations to how I think about it now, I think Cardboard's value of $2 US is right, and it will probably get there. From then on, it's a matter of executing additional non-core until its left with 56k boe/d of production. The next phase of the investment would be hinged on commodity prices and the company's ability to execute.

BXE is another one I think Cardboard owns as well, my firm owns a chunk of BXE and expect non-core to go through first half next year. That's one I'm paying most attention to along with Gear Energy.

But I think PWE will work out fine from here, and as long as the other noncore goes through, it's a multi bagger from here... A total miss for me.

"it's a multi bagger from here... A total miss for me."  Why not invest now then?  Still anchoring or invested in other companies?

Massive anchoring combined with a big position in Gear and BXE. I'm fully invested in O&G.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 04, 2015, 02:03:57 PM
I took some shares off the table today and in the past week.  I am speculating the earnings release to take the stock down a bit.  I still hold about 30 k shares; down from around 50 k.  Always a dicey proposition trying to out guess Mr. Market.

Actually I kind of learned "tactical" selling and buying from you on this board. This kind of helped me with PWE since the beginning. But I feel like "sitting on my ass" this time around...
Title: Re: PWE - Penn West Petroleum
Post by: zippy1 on November 05, 2015, 05:29:27 AM
Q3 result out!
http://finance.yahoo.com/news/penn-west-announces-financial-operational-113000529.html
Quote
Financial and Operational Highlights

During the third quarter, we entered into agreements to sell our Mitsue properties for proceeds of approximately $193 million and our Weyburn Unit working interest for proceeds of $205 million, prior to closing adjustments.  Subsequent to the end of the third quarter, the Mitsue transaction closed on October 30, 2015 and we anticipate the Weyburn transaction to close in November 2015, with proceeds from both dispositions to be applied against our senior notes and our syndicated bank facility

As at September 30, 2015, we were in compliance with all of our financial covenants under our lending agreements and had approximately $650 million of undrawn capacity under our syndicated bank facility of $1.2 billion. Senior Debt to EBITDA was 4.3 times, relative to a 5.0 times limit

Production in the third quarter averaged 82,198 barrels of oil equivalent per day.  The majority of the difference relative to the second quarter was the result of dispositions closed in late June. Third quarter volumes were also impacted by approximately 1,000 barrels of oil equivalent per day of third party infrastructure constraints, including the TransCanada Pipeline and Alliance Pipeline systems.  Additionally, certain turnarounds had been deferred from the second quarter for operational reasons

Third quarter funds flow from operations, which excludes foreign exchange hedge monetizations/settlements, realized foreign exchange losses and restructuring charges was $45 million ($0.09 per share).  Despite WTI prices of approximately US$46 per barrel, resulting in Edmonton Par prices of approximately $56 per barrel, our field netbacks including risk management activities remained strong at approximately $14 per boe

Capital expenditures were $116 million during the third quarter of 2015, with our development program selectively focused on the Viking and Cardium plays

In the third quarter of 2015, we recorded non-cash impairment charges of $435 million primarily related to certain non-core properties in the Fort St. John area of northeastern British Columbia and in the Swan Hills and Wainwright areas of Alberta. This was mainly due to a decline in forecasted commodity prices compared to December 31, 2014

Additionally, as a result of entering into definitive sales agreements related to the Mitsue and Weyburn transactions, we recorded non-cash impairment charges of $399 million on these two transactions as the book value of these assets exceeded the fair value received
Title: Re: PWE - Penn West Petroleum
Post by: Uccmal on November 05, 2015, 08:30:01 AM
I took some shares off the table today and in the past week.  I am speculating the earnings release to take the stock down a bit.  I still hold about 30 k shares; down from around 50 k.  Always a dicey proposition trying to out guess Mr. Market.

Actually I kind of learned "tactical" selling and buying from you on this board. This kind of helped me with PWE since the beginning. But I feel like "sitting on my ass" this time around...

Hasn't really worked out so far.  Might have netted a couple of hundred after tax.  Bought back in this morning.  I am trying to figure if there will be any tax loss selling this year.  The stock price a year ago was just over $5.00.  It was down around 2 CDN at year end.  I am thinkimg that anyone who had losses took them a long time ago.  The stock has traded several times its total float this year.
Title: Re: PWE - Penn West Petroleum
Post by: goldfinger on November 05, 2015, 08:40:26 AM
"I am thinkimg that anyone who had losses took them a long time ago."

Yeah I know I sure did and then redeployed at these crazy recent prices. The reaction in the stock today after earnings may mean we stay above 1.something$ from now on... unless they categorically fail with asset sales going forward...
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on November 05, 2015, 10:24:01 AM
Regarding tax loss selling, I am thinking that those considering that option might be observing at what speed this has been moving up and opting instead to hold the stock to recuperate their money.

Cardboard

Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on November 05, 2015, 10:35:19 AM
Very, very nice quarter….
Interesting is that when you back off the 2 big impairment charges, they had a net income of 92M; in awful business conditions.
Annualize Q3, and put a 5.5x multiple on it – and you get a rough value of around CAD 4.03. If there is another asset sale, it will be a lot higher.

SD


Loss         -764,000,000
Impairment charge         435,000,000
Impairment loss         421,000,000
Adjusted Q3 earnings         92,000,000
Annualized Q3 earnings         368,000,000
Share count         502,163,000
Annualized EPS         0.73
EPS multiple         5.5
Rough valuation         4.03


Remaining non-core assets up for sale
In the third quarter of 2015, Penn West recorded an impairment charge of $435 million primarily related to certain non-core properties in the Fort St. John area of northeastern British Columbia and in the Swan Hills and Wainwright areas of Alberta. This was mainly due to a decline in forecasted commodity prices compared to December 31, 2014 for these non-core areas.

Recent sales
As a result of entering into two definitive sale agreements during the third quarter of 2015, at September 30, 2015, the Company classified certain non-core assets located in the Mitsue area of Central Alberta and in the Weyburn area of Southeast Saskatchewan as assets held for sale. Subsequent to quarter-end, on October 30, 2015, the Mitsue disposition closed for total proceeds of $193 million, subject to closing adjustments. Penn West expects the Weyburn transaction to close in November 2015 with anticipated total proceeds of $205 million, subject to closing adjustments.

On September 30, 2015, these assets were recorded at the lesser of fair value less costs to sell and their carrying amount, resulting in an impairment loss of $421 million of which $399 million has been recorded as additional depletion, depreciation and impairment and $22 million has been recorded as impairment of goodwill on the Consolidated Statements of Income (Loss).
Title: Re: PWE - Penn West Petroleum
Post by: influx on November 06, 2015, 05:04:40 AM
Massive anchoring combined with a big position in Gear and BXE. I'm fully invested in O&G.

If PWT is a multi-bugger...then am I safe to assume you still think Gear and BXE has larger/better upside than PWT? Otherwise you would switch one for PWT I guess? If not, then what is the thought process here?
Title: Re: PWE - Penn West Petroleum
Post by: Cardboard on November 06, 2015, 06:15:32 AM
SD,

I think that you should adjust for: income tax recovery, impairment of goodwill, restructuring, foreign exchange loss, foreign exchange gain from risk management... that will sober you up...

Cardboard
Title: Re: PWE - Penn West Petroleum
Post by: SharperDingaan on November 06, 2015, 10:35:23 AM
We hear you, but it really comes down to how you treat the 45M of net F/X hedge monetizations/settlements, realized foreign exchange losses and restructuring charges. If you think it was a one-off - subtract it from net income. We’re just assuming an average extra 45M/quarter from all sources for the next 4 quarters … don’t much care where. Interest and operating savings from forthcoming debt repayment, asset sales, and hedge gains doesn’t seem much of a stretch in todays forecast environment.

The key takeaway is that we are now at today’s market value on pretty much all assets, inclusive of reserves.

SD
Title: Re: PWE - Penn West Petroleum
Post by: Wilson-TPC on November 06, 2015, 10:53:26 AM
Massive anchoring combined with a big position in Gear and BXE. I'm fully invested in O&G.

If PWT is a multi-bugger...then am I safe to assume you still think Gear and BXE has larger/better upside than P