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Penn West Petroleum Ltd. Message Board

  • finplan43054 finplan43054 Nov 8, 2012 3:40 PM Flag

    Good luck Longs

    I was a big believer (and a bigger investor) in Canroys in years past. Until that lying piece of whale doodoo that passes as a Prime Minister broke his promise "not to touch the Canroys". After the Halloween Massacre in 2006, I held a few more years and then bailed when there was a half-hearted rally, but still not very close to my initial entry point, however with the dividends that I collected, I almost achieved breakeven status.

    The game changed at that point, and I thought it was very clear that the writing was on the wall for these entities. They can't continue to pay out the dividends that they envisioned. Sure, they had cash set asides and tax credits ad nauseum and that's what they lived on for the next few years (or rather, what you investors lived on).

    The gig is up now. In case it passed you by, PWE dropped after the massacre (of course they all did), and then dropped again after the financial crisis, and then climbed again in a fake rally as the fervor over peak oil came to a head and the speculators went crazy, and now that that fad has passed, PWE is in its waning days. Down first by 30-40%, back up 30%, then a steady downward trend. Now it's down 75% from the Massacre. This in spite of the reckless divvie payouts and the promises of greener days when the new corporate structures came into being.

    There are a bunch of people shouting that you should back up the truck and hock the wife and kids and dog and buy this thing. That would be a mistake. The world economy is in a slump and is going to stay there for some time. We are awash in oil now, and the US alone this year is producing more than it has since 1993, and will produce 500K more barrels next year than this year. The EU and US are practically dead in the water, China and the BRICs are slowing rapidly. Demand is going down at massive rates while production is going full bore (and China is not buying anymore). The oversupply and overproduction will last at least through 2013, and will keep the oil price depressed. My guess is there will not be more than a $5-10 price difference during the entire year 2013 from current levels, absent any geopolitical firestorms that could jack up the price temporarily.

    The point of all this is that PWE cannot sustain its payout. They are robbing Peter to pay Paul now, and with oil remaining stubbornly low, their profits are going to dry up. You've already seen them swing from profit to losses, and that trend will continue, both because of low oil and the tax structure. The new company setup simply cannot sustain itself as was foreseen and predicted. They have no choice but to cut the dividend again and again (remember the 40% cut in 2010?).

    The nice things about forums is that you can argue and argue and argue, but rarely will anything that is said change anyone's mind. But for those who espouse this nonsense about PWE being a "great buying opportunity" and that "book value is double the share price", boy howdy, do I have a bridge to sell you.

    It ain't rocket science folks. I do feel sorry for those diehards who stuck by this piglet, but you should have run as fast as you could when this doggy busted through $20. Salvaging your position now would entail a big loss for many of you. But I submit that taking a 30, 40, 50% hit now is far superior to taking a 70, 80 or 90% later. Remember Provident? And the rest of the dogs that went under thanks the Harper's malfeasance? It is a continuing process. The only real hope is that a foreign company will come in and buy them, but don't expect any massive offer for the deal. Those huge "book assets" that seems to lull so many of you into a false sense of security is smoke and mirrors, contrived to protect the bank lines and serve as an underpinning to the stock (hasn't worked, has it?). Their rendition of "book value" is about as trustworthy as the banks was back in 2008.

    Anyway, I've had my rant. Best of luck to all of you, whichever way you swing. Some will win, some will lose. That's the nature of the game. Only you can decide which one you will be.

    Disclosure: I am not long or short PWE. I am financially uninterested in PWE.

    Sentiment: Strong Sell

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    • ya your right, i went down after halloween mass. the money i lost was in the thousands ,i buy then see the down trend sell then buy again in hopes it was the bottom.Now almost 72 and almost broke .iam scared to invest in any thing..Very hard to trust any investment..they appear to be mostly pipe dreams.better to take what is left and streach it as far as it will go.

      Sentiment: Strong Sell

      • 1 Reply to pclarke67
      • Sorry to hear it, PC....yes, so many people got slaughtered in the Massacre, after all, there was a huge amount of money invested in the Canroys from pension plans and thousands of retirees and near-retirees (on both sides of the border) looking for that good dividend. In your situation now, having been clipped once, and with interest rates so low, it is damned difficult if not impossible to get any kind of safe return. I do hope something will come up that will allow you to improve your situation. Very best of luck to you.

        Sentiment: Strong Sell

    • I'm banking on the continued adoption of nat gas in fleets, heating and electricity generation. I also suspect the US administration will do everything they can infrastructure wise to increase the us eof nat gas in an effort to put people to work. Hopefully this keeps demand steady or increases it. But who really knows.

      • 2 Replies to lakemcg
      • Lake, The only problem is the oversupply of natgas now which has caused a 30% year-over-year decrease in the price. The working inventories are at record levels (I'm speaking only of the US, I don't know the Canadian numbers but I'm pretty sure they're close to the same), and since storage capacity is already maxed out, even production of gas has to slow or be suspended. If there's nowhere to store it, you can't produce it. IMO the price is going to increase a bit overall in 2013, with a colder winter than last year projected, and some of the excess inventory might get used, but not really enough to put a big dent in the supply. And with Obama's push for renewable sources of energy and the increasing use of them, this will simply cut demand even more. But you are 100%....who really knows? Anything can happen.

        Sentiment: Strong Sell

      • want to buy . at 9 or is that to low?

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