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Penn West Petroleum Ltd. Message Board

  • ohio_whitebear ohio_whitebear Jan 28, 2013 7:33 PM Flag

    The cold, hard truth is a bitter pill

    This post is not for the current owners/cheerleaders of PWE. Nothing is going to change their minds about owning this stock, in their minds it's the greatest story ever told. This is for those gentle readers who have, in a moment of delusional weakness, contemplated putting hard earned money into this equity. Here's some facts that you should consider. This is not to say that PWE will definitely turn out to be a lousy investment if you were to buy it. They are simply some facts that should be considered, and maybe if you find them useful, you will decide that perhaps it's better to put your money into something that doesn't carry the high risk that PWE does.

    People here are touting PWE as a "growth" story. Historically it has been anything but that. However, let's assume there's a shot for glory here. The factors that make a stock grow are examined here. The benchmark is the S&P500 (because regardless of sector, all growth stocks share common measures). Some measurements are stock-specific, some are average. Historically, all stocks that have been classed as "growth" have shared these common measurements and performances. Let's see where PWE stacks up against them.

    1. PWE's payout ratio is 310%, vs. its historical ratio of 153%.
    2. PWE's return on equity is 1.8%, you want to see something north of 16%.
    3. PWE's pre-tax margin of 7% is lower, you want to see something north of 8%.
    4. Commonly, debt/equity ratio should be less than 20%, PWE is 43.6% (however this is not too out of line with its peers).
    5. P/E ratio should be in the bottom 20% of market (currently 9.2), PWE's is 30.
    6. Relative Strength is 19, and has been declining over the past 4 months (you want to see something north of 70 for consistent growth). In contrast, there are 56 companies in the Oil and Gas Operations sector that have RS at or above 80.
    7. Sales and EPS Growth is negative.
    8. PWE insiders hold 0.26% of the outstanding shares. Should be 10% or more.
    9. Outstanding shares of 476 million. Way too high, a small mid-cap that issues so many shares is simply diluting the shareholder base.
    10. Earnings consistency: for the last 5 years, PWE's has been 0.86, -13.32, 1.42, 2.52, and 1.39. There has not been consistent, upward growth of earnings.

    All of these factors, when combined with the historic share price movement, make a compelling argument to avoid this stock. This does not rule out investing in it as a gamble or a momentum play, but it certainly rules out any serious long-term involvement as a staple in your portfolio.

    Sentiment: Sell

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    • ador Apr 15, 2013 8:55 PM Flag

      Are you watching the news ? the horrific tragedy thats unfolding in your country ! Who do you want to bye your oil from Canada or country's that are bent on destroying America and it's people.
      Go back to your cave.

      • 1 Reply to ador
      • You probably haven't been told lately that you're an idiot....but guess what.... what a moron. You're a walking example of why we need enforced eugenics. Where do i want to "bye" my oil from? The same place everyone else does, fool. From the worldwide market. What in god's name does that have to do with whatever you're babbling about? Geez...this "horrific tragedy" is nothing compared to the fact that we allow complete ditz's run around loose. What inside info do you have on who did this terrible thing? The news media haven't reported anything about even a suspect yet. Or have you consulted your crystal ball and come up with the same old boogeyman? You sound a bit racist and xenophobic my friend, get some professional help.

        Sentiment: Strong Sell

    • We need a new rule on these boards. If you have no financial interest (ownership) in a stock you simply are not allowed to post..LOL!
      BTW: Welcome to IGNORE.

      • 1 Reply to lionelman17
      • Yep Lionelman, you are so right! Another new rule should be that if you have little or no intelligence you shouldn't be allowed to post either. As you say: LOL (BTW, it's not kewl to laugh at your own "joke", no matter how lame it is.) "Welcome to IGNORE"?? hehe you think you rate that highly? Nah. Contrary to your definition of "financial interest" as "ownership" definition, I have a financial interest as of today, perhaps you missed my post. Satisfied? Or did you really mean only "owners" should be allowed to post? That would fit the mentality here much more, since you're only interested in cheerleading and shouting encouragement to each other.

        Sentiment: Sell

    • The cold hard truth is that PWE pays out only 40.3% of it's 12 month cash flow run rate of $2.68 per share which is sustainable.

      Another cold hard truth is that Penn West has already signed agreements to sell non-core assets valued at 1.3 billion US dollars which management plans to use to reduce the debt and strenthen it's balance sheet.

      When you talk about avoiding this stock you should consider that the net asset value as of the third quarter was $18.78 so anyone buying the stock at the current price of $10.28 would be getting far more assets than they are paying for along with a sustainable 10.8% yield.

      Another cold hard fact is that companies like Penn West that have sustantially more assets than liabilities don't go bankrupt.

      Sentiment: Strong Buy

      • 3 Replies to hardmetalman42
      • HMM thanks for the data. Here are a few more points which endear me to the Canadian oil stocks:
        1. Cost of oil production is increasing by 7% yearly
        2. Yearly production of crude+condensate, OPEC & NonOPEC is decreasing by 4-6%
        3. Keystone XL will probably be approved soon, alleviating the Hardisty glut.
        4. This oil is in a safe jurisdiction.
        As investors we should back up and take a broader view of world oil production. My opinion is that on a longer term basis these stocks will be extremely valuable. Short term their price is being affected by lack of transportation, the same oversupply dynamic as is happening with Cushing. It appears to me this is an amazing investment opportunity for as long as their reserves last.
        As for ohio_whitewhatever & his alter ego "finplan" ... simply nutters who have found a very unique method of #$%$ on peoples shoes.

      • Oh yes, hardmetal, you're absolutely right. Mr. Market is just way too dumb to have figured it out. It's great that you have. All those analysts, institutional investors and insiders just don't have the clue you do. And yes, all that garbage has been considered in the numbers. Wise investment choice. The market should learn something from you guys. Rah Rah Rah GOOOOOOOO PWE Two Four Six Eight, who do we appreciate.... Penn West Penn West Penn West YEAH. guys are right. This camaraderie is awesome! It really makes me feel like one of the group now. I wonder, is it too early to start talking about the next dividend? I mean, I'm really looking forward to it. I figure the next 26 cents will only have cost everyone $2.50 since your darling was $12.76 on November 1 when they declared the last one. Gosh, only a 20% decline in price since then? No problemo, easy to overcome. The next dividend will help soothe the pain. mmmmm divvies... yummy.... Rah Rah Rah

        Sentiment: Sell

      • I agree with long term view but we have to acknowledge that cheap stocks can get cheaper. I wouldnt be surprised to see it go to the high 8's next month before rebounding in spring

    • And your daily posting advising us longs, proves you are the only manufactures and dispenser of "The cold, hard truth is a bitter pill" here! lol

      I looked up a few of your older posts. You have been on board for a number of years. Personally, I am baffled why you keep hanging around, perhaps you may enlighten this board by sharing your reasons.

      Finally, for my money, it SEEMS that PWE has bottomed and that is why I am here. I may be wrong which won’t be the first time. But my investment approach is to weigh RISK & REWARDS & invest. When things go wrong I cut my losses & hope to have learned from my mistakes. Good luck to you.

      • 1 Reply to simlogger
      • OK simlogger, fair question. Let me ask the same question to you too. The basic truth is you longs have the idea that there's only one point of view: to own it. Any other opinion is rubbish, something not to be allowed, something tainted and diseased. And yet you do the same thing you accuse me of...sharing your opinion. The only difference is that you cheerlead and deceive each other with your constant BS about how pipelines, imaginary price increases, new management directions, anything at all, any hocus pocus to convince yourselves that this is the best investment ever. Another bitter truth is that you guys have been wrong, all along. Period. You can't admit it, and you can't stand it when someone points it out to you. This stock has been a diaster waiting to happen for the last 5 years. Deny it to your heart's content, you can't change the facts. I've been on this board for years, yes. Because I've been involved in this stock for years. I figure I've bought the right to post here, just as you have. And I will continue to post here, as long as I have interest in rubbing your hypocritical noses in your pompous mistake. Yeah, it's very satisfying to know when one has made the right decision, and yeah, it's satisfying to say "I told you so" to the small crowd of selt-hypnotizing cheerleaders. But I'll tell ya what. My interest is waning, because one can only talk to a brick wall for so long. I'll be happy to relinquish my space here, and let you guys soothe and console yourselves and lick each others' wounds. Ouch, another down day. It must really blow to be you guys. I know, you all got in at 10.25, so you're still even. Great investment choice, doods. I'll see you again later, we can talk about what a great buy it is when it's 9. Enjoy that juicy dividend, men! You're paying for it. LOL it's like giving you a $20 bill and you giving me a $50 back. I can stand that kind of investment every day. hehe

        Sentiment: Sell

    • Funny that when you spoke of growth you did not mention growth in their assets which was their strategy during the time these financial measures recorded. The recent sale of some of their non-core assets demostrate the high value of these assets. I expect with the change in strategy to focus on capital cost efficiencies this year these financial measures will significantly improve. When transportation issues are resolved then I would expect dramatic improvement. Don't let that Mack hit you head on by looking in the rearview mirror.

      Sentiment: Strong Buy

      • 3 Replies to spinergy888
      • That's pure fiction, spinergy. I didn't mention the points you make because they're not based on fact or reality. What "growth of assets"? They borrowed and issued shares to buy them, now they have to sell the so-called "non-core" assets just to pay the bills. C'mon. The recent sale demonstrates the "high value" ?? hehehe No, it simply demonstrates they had to dispose of them. You can "expect" all you want, but I fear you will have to live with disappointment. And when the "transportation issues" are resolved, it won't mean a whit to PWE. You are saying all the right buzzwords to evoke confidence, but the substance is not there.

        Sentiment: Sell

      • spinergy, Just because I look at the history does not necessarily indicate that I will be broadsided by the obvious. Sometimes looking backward is the only way to see what lies ahead. In PWE's case, it is very clear. Someone said back in November that it couldn't hold 11, and was right. In November, you were touting it as a buy at 11.50. I know I know...if you liked it at 11.50, you have to love it at 10.40. It will be the same story when it is 9.50 too.

        Sentiment: Sell

      • I agree with the above two positive posters. I owned PWE before the Halloween Massacre and was out of Canada for the most part until very recently. I have since purchased 3700 shs approx @ avg $10.40. They had a boatload of reserves way back then and have absorbed a number of trusts in the last few years. Perhaps they have spent too much time assessing what they have but it is to our long term benefit as the can establish what is bette core holdings and what can be sold. This is deleverage their balance sheet and develop cash flow consistency. And the payout ratio is favorable. And management can't be faulted for issues beyond their control regarding politics of pipeline logistics, which will be resolved.

        Sentiment: Strong Buy

    • I have had success taking large positions in deep value plays that pay a dividend that I think is sustainable. I bought PWE shares in November because the stock fits my investing thesis. The items you list are reasons the stock is down. You could also add poor management that hasn't delivered on expectations to your list (also, bad communication). I believe the stock price will go up substantially over time due to inflation (i.e., rising commodity prices), future infrastructure expansion in Canada, (and the Keystone pipeline), and the ability to ramp up production substantially when the spread against WTI narrows. I expect sustained periods of malaise spiced with substantial pops, and I believe that the dividend will continue to be paid. If I lose, I lose. But I don't think that I will.

1.85+0.14(+8.19%)Sep 28 4:02 PMEDT