Last ER was on Nov 6 so we are about a week behind. Generally this is not a good sign, however it is fair to believe there are good reasons to delay a bit this time to provide more updated information if the company is in late negotiation talks for new or perhaps last round of assets sales:
Several important numbers were already released during Q4 update on January 21:
175 mm sales,
100mm cost reduction
“not to restore more than 3,200 boed of interrupted production”
113 boed exist production rate after subtracting 486mm sold assets
New production guidance for 2014 of 101K-105K boed
2.9 bln net debt by the end of Q4.
Completion of 586mm assets sales for paying down debt
Most important to me was the debt level at 2.9 bln. The company was not specific enough if this was before paying down 486mm or after.
“proceeds from the previously announced phase one dispositions in the amount of $486 million that closed in late December, 2013 were used to pay down outstanding indebtedness on the Company's credit facilities. Penn West's year-end 2013 total debt is expected to be approximately $2.9 billion”
After re-reading again I think that was BEFORE as update was done on January 21. If so, the progress is obvious – 100mm in Q4 – from just internal savings – to 2.9 bln. After closing additional 175 mm for a total of 660 mm the debt level should plunge to 2.24-2.34 bln range. The lower end - if Q1 flow is positive, upper end – if not.
Incremental production increase will be in Q3 this year.
So if we see the last round of sales for 1 bln or so announced at the ER, that should put the bottom for the stock. We might hear slightly adjusted plans based on higher than expected NG and oil prices. They did it once with 486mm sales:
Realized “Approximately 1.1 times Penn West's internal proved plus probable producing reserves value using evaluator prices at November 30, 2013”
Since then prices rose even much more, so asset values increased more than 10%.
I have re-read the semantics which you reference in you post and UNFORTUNATELY do not read it as vague or ambiguous BUT I interpret the year end debt results as INCLUSIVE of the pay down. At these sales transactions, a release price it s negotiated with the Lender (often 100% of Seller's net proceeds) before closing and the money is wired to the secured lender (i.e. the Bank.) These transactions closed in December and not only would have been contemplated - they would have been applied and included. I DO wish your hunch was correct - I just simply believe you are mistaken. I speculate (and I do NOT intend insult here) that the confusion is ONLY because English is a 2nd language for you (or perhaps a 3rd, or 4th). I am not suggesting that your English is not better than my own. Below is ALL of the company language, and in context - I find it extremely clear:
"Demonstrating progress on the Company's strategy to strengthen its financial position, proceeds from the previously announced phase one dispositions in the amount of $486 million that closed in late December, 2013 were used to pay down outstanding indebtedness on the Company's credit facilities. Penn West's year-end 2013 total debt is expected to be approximately $2.9 billion representing an estimated total debt-to-funds flow multiple of 2.7 times and a senior debt-to-EBITDA multiple of 2.2 times."
Your input is appreciated, actually I invited all to reread again and post their opinions. Originally on Jan 21 my interpretation was same as yours and I was very disappointed with numbers thinking that stock drop from 8’s to 7’s was mostly due to insufficient debt reduction rather than slight production decrease.
Later on February 8 Michael Blair from Seeking Alpha posted his interpretation with assumption of debt reduction to $2.4 bln.
“The recently announced sale of $175 million of non-core assets scheduled to close in March follows a $486 million asset disposal that closed in the fourth quarter of 2013.
The combined sales should bring Penn West debt down to the $2.4 billion range from about $3.0 billion as at September 30, 2013.”
So I reread again and started to think I may be wrong with my initial interpretation. A few questions were raised:
1. Is Michael Blair wrong?
2. If my initial interpretation same as yours was correct, the debt level was reduced by just $100mm from 3.0 to 2.9 bln during Q4 after sales proceeds of $486mm. Where did the other $386mm go? Q4 production was inline except just a few days after sales closing. Capex was very low at a bit above $200mm. It is hard to believe in $386mm drop in cash flow. If yes, we are all in a big trouble, but I don’t think so.
3. If $486mm we used for paying debt at closing, why did not Penn West confirm that at their closing announcement on Dec 20, but did it on Jan 21 instead?
Bottom line: Something has to give. Either they paid debt in Q1, so Q4 numbers of 2.9 bln did not include $486mm proceeds, or they paid in Q4 to close the bridge, but a lot of cash flow from Q4 was for some reasons delayed, moved into January and remained in account receivable. Both cases were good for us.
The 3rd worse case: they have accumulated ~$386mm in short term debt and other obligations not included in previous records and this one time payment has helped getting rid of all of them. I’m still hoping for first two.GL