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Penn West Petroleum Ltd. Message Board

  • aldentefranchesco aldentefranchesco Mar 20, 2013 4:12 PM Flag

    The short term issue

    Now that the dividend is around 9%, the momentum to move this upward is fading. Either natural gas price goes up or the WTI differential pricing shrinks in order to power forward. I feel we are now in a tight trading range. Longer term, as the economy proves to be resilient following the fed report today, we may be in for a long price stability with "occasional" sharp declines and increases in the stock price based on options expiration cycles and the short selling and recovering usually associated with these events..

    It is up to the PWE management now to set the stage for what to expect beyond what I just said above. If they keep the dividend unchanged, the stock price will stay in a range that sustains at least 8% of dividend return. If they lower the dividend (say to 15 cents/quarter), the stock price will adjust to support between 6% and 7% return from dividend.

    This is just my own analysis and hence do your own due diligence before you make any investment decision.

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    • Really both things are happening. Natural gas is approaching $4 and probably will go higher this summer if NOAA is right and the summer is warm. Edmonton light sweet crude average about $88 per bbl last month and currently is close to $90 so the differential is narrowing.. the narrowing of the differential is probably due to some additional cpacity out of cushing and in increase rail cars that is addressing the bottleneck issues. I believe the bigger issue for PWE is $12 is the 200 day moving average and it will take some significant news to breach that barrier.

      • 1 Reply to lasvegasfreddie
      • What you just said supports my thought. The stock price did go up 12% because of what you mentioned. However, do not forget that the price determines the percentage return from dividend. This stock has just entered a cyclical period in my opinion. The PWE attraction is the high dividend. Something a lot more solid than the current OIL&Gas pricing must take place for a sustainable stock price increase. Call me crazy but I believe a "relatively" small cut in dividend (-25%) should make this stock a lot stronger over time. The stock price hit will be minimal (~-10%) but the psychological effect is positive over the long term.

 
PWE
1.35-0.03(-2.17%)Jul 31 4:02 PMEDT