Penn West Petroleum Ltd. (NYSE:PWE)

CAPS Rating: 4 out of 5

The Company's direct and indirect subsidiaries and partnerships are in the business of acquiring, developing, exploiting and holding interests in petroleum and natural gas properties and assets related thereto.

Recs

1
Player Avatar GGGilmore (67.62) Submitted: 3/22/2010 1:44:27 PM : Underperform Start Price: $16.55 PWE Score: +72.68

The price and the dividend payment of PWE is influenced by the value of the Canadian $ (the Loonie) vs the US $. The dividend has been a steady payout of $.15 Canadian since April, 2009, but to US investors, it has increased from $.124 to nearly $.15. Why? Because the value of the Canadian Dollar has increased in value to par with the US dollar. The Canadian dollar is at a historical strong point against the US dollar. One would have to believe that the Loonie will continue to increase against the US dollar in order for the dividend (and thus the stock) to become more valuable. While I believe that there may be some more appreciation in the Loonie in 2010 and even in 2011, it will be small compared to what we have seen in the last year. So, any growth in the dividend and stock price must come from improved profit performance of the company. PWE derives about 42% of its income from natural gas and only has 17% of that under contract. The rest will be sold on the spot market. I believe that natural gas prices are not going up anytime soon due to increased discoveries here in the US coming on line and a continued slow economic recovery. I think the large prortion of natural gas sales, espcially at spot market prices, is going to hold back profits for PWE for at least the next couple of years. In addition to all this, PWE is set to become a corporation in the next 18 months. They made it very clear on their website that after they become a corporation, investors gains will come from BOTH stock priced appreciation and the dividend. Read between the lines - a cut in the dividend is coming. While I think they will continue to pay out a dividend, it will be much reduced from what it is today. Another factor that concerns me is the amount of Goodwill that has accumulated on their books. In 2005, their balance sheet showed $0 in Goodwill. At the end of 2009, there was over $2 billion in Goodwill on their balance sheet resulting from the overpayment (in my opinion, that is what Goodwill represents) of assets/companies they have purchased in the last 4 years. Finally, we all know the market does not like uncertainty. I think there is a lot of uncertainty tied to PWE for the next couple of years. How will changing to a corporation affect the dividend and the companies performance? Will the Loonie retreat to a historical subpar level to the US greenback thus making the current dividend worth less to US holders of the stock? Where are the prices of natural gas headed?

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Member Avatar tomfoolme (< 20) Submitted: 3/31/2010 1:08:09 AM
Recs: 0

YEP The dollar is going down... "One would have to believe that the Loonie will continue to increase against the US dollar in order for the dividend (and thus the stock) to become more valuable. "

Member Avatar maverickpl (74.08) Submitted: 4/20/2010 11:57:33 AM
Recs: 0

Does today's news of the Canadian Central Bank looking to raise rates change your opinion on this one?

Member Avatar willadol (< 20) Submitted: 6/26/2012 3:28:29 PM
Recs: 0

the canadian govt.,over years desired a weak loonie 85% OF US DOLLAR,IN MY HUMBLE OPINION,they like things now as the loonie is low like they want and all sectors will prosper.,william

Member Avatar willadol (< 20) Submitted: 6/26/2012 3:29:22 PM
Recs: 0

the canadian govt.,over years desired a weak loonie 85% OF US DOLLAR,IN MY HUMBLE OPINION,they like things now as the loonie is low like they want and all sectors will prosper.,william

Member Avatar willadol (< 20) Submitted: 6/26/2012 3:29:59 PM
Recs: 0

the canadian govt.,over years desired a weak loonie 85% OF US DOLLAR,IN MY HUMBLE OPINION,they like things now as the loonie is low like they want and all sectors will prosper.,william

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