Penn West Announces the Closing of the Sale of Its Saskatchewan Assets
Jun 24, 2016
CALGARY, June 24, 2016 /CNW/ - PENN WEST PETROLEUM LTD. (TSX - PWT; NYSE - PWE.BC) ("Penn West", the "Company", "we", "us" or "our") is pleased to announce that it has successfully closed the previously announced sale of all of its Saskatchewan assets for cash consideration of approximately $975 million, subject to closing adjustments. The Company will offer the net cash proceeds from the sale to its lenders and noteholders at par on a pro rata basis.
"This transaction marks a significant turning point for Penn West. We have worked tirelessly to achieve top-tier performance on all operating fronts in our core areas and now with our re-constituted balance sheet and capital structure we will move our leverage metrics to top tier status as well", David Dyck, Senior Vice President and Chief Financial Officer of Penn West commented. "We expect to be in full compliance with all of our financial covenants at the end of the second quarter and anticipate the removal of the going concern note from our financial statements in the near future. As the benefits of our improved capital structure become more visible to investors over the coming months, we believe the market will close the valuation gap in our stock price. With our past largely behind us and our prospects bright, Penn West is now a very compelling value proposition for investors."
We will continue to execute on the second phase of our asset disposition program over the coming months in order to high-grade our portfolio and continue to reduce our cost structure. We expect to provide an update of our ongoing plans along with second quarter financial results in early August 2016.
Management has done something that very few in the industry have accomplished. This management led this company from near bankruptcy to low cost production with a very viable future. The dropping commodity prices and reorganization costs have hid much of the progress and made the company's common stock a bargain. There is still some cleaning up to do, and there will probably be more non-recurring charges, but the end of the reorganization is now in sight.
Using the closing price of the stock on Friday, June 10, 2016, the market value of the company's common stock was roughly $461 million. When the long term debt after the current deals close is added in, the total value of the corporation is about $1 billion. The company is expected to have roughly 50,000 BOED. So an investor would pay about $20,000 BOED, which is less than a third of what the latest bidder paid for some of the company properties. Expect the market to catch on to this bargain, but wise investors may want to look now, as management this good seldom stays cheap.
Plus this management will grow the company and probably eventually sell it at a far bigger profit than the market can currently imagine. Already management has made some slides showing the company growing at 15% a year. Management will probably exceed that goal, but there are far worse things than to grow 15% a year.
leases to assess for themselves whether or not this company fits their investment risk profile.
– Investors with long positions (as of March 31): 11
– Aggregate value of investors’ holdings (as of March 31): $19.44 million
The battle for the top spot is a virtual dead heat between Penn West Petroleum Ltd (USA) (NYSE:PWE) and C&J Energy Services, Ltd. (NYSE:CJES), with both having attracted the attention of 11 of the hedge funds that Insider Monkey tracks, while having a nearly identical amount of money invested in them from those 11 funds. FrontFour Capital Group, run by Stephen Loukas, David A. Lorber and Zachary George, holds the largest position in Penn West Petroleum Ltd (USA) (NYSE:PWE) among the funds we follow, amounting to 13.8 million shares valued at $12.8 million according to its latest 13F filing. On May 16 the company released its first quarter earnings report, posting a loss of $72.9 million. Adjusted for restructuring costs, the loss stood at $0.14 per share, while revenue came in at $168.4 million. Penn West Petroleum Ltd (USA) (NYSE:PWE) said it may default on its loans at the end of the second quarter if it does not reach an agreement with its creditors to restructure its debt. The company also said it will continue to sell assets in order to reduce its debt load. Shares of Penn West Petroleum trade at $0.72, down by 63% in the last year.