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Penn West Petroleum Ltd. Message Board

mrpev 168 posts  |  Last Activity: 19 hours ago Member since: Aug 15, 2005
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  • I tend to agree with Georgia at this point. Stock buybacks are powerful tools in supporting stock price when nobody else is buying and a stock is in control of sellers. Stock buyback sends strong signal to investors that the company is undervalued in management view.

    However stock buybacks should be financed from operational cash flow, not from borrowing. We don’t know exact financial conditions until next earning report. Still I think the minor buyback of ~$240mm for 10% shares outstanding would serve its purpose. It would sent the powerful signal that the management expects increasing cash flow in coming months and years, restore investor’s confidence and discourage sellers.

    I’m not sure that $65mm for quarterly buyback would be available from cash flows at current commodity prices. But what we know is that all new capex in higher margin fields from Q1 to Q3 2014 should start adding better margins in Q4.
    I wouldn’t have a problem even if such small buyback would initially be financed from asset sales. This is too small amount compared to $1 bln sold and $1 bln more in potential sales. After the latest asset sales the debt to revenue ratio will come down to ~1.0 which is pretty good and is at the lowest point among all E&P companies. With such number PWE should deserve the stock valuing at book value.

    If Roberts sales 1 bln more and brings debt to revenue down to 0.5-0.6 next year, the stock should be valuing at a premium to book value. I believe this will happen in the next 2-3 years. GLTAL
    Staying the course and buying today

    Sentiment: Strong Buy

  • The worst is over for global oil prices, according to UBS AG and Barclays Plc

  • Up 3% or 12 cents today at 4.15 November futures as I type and testing August high, prior to that-July high. Feels like wants moving higher after next weekly report.
    Crude is also participating, up 1% at 94.44 as I type. It bounced up significantly from 90 in the last few days. 95 is the critical technical level to watch.

    Sentiment: Strong Buy

  • Stocks are at 2.891 tcf compared to 3.292 tcf last year and 3.335 tcf in the 5 year average.
    We still have ~400 bcf cushion, but the gap is shrinking fast. We had almost 1 tcf gap by the end of the last winter season, and now it is just 400 bcf. It still provides some support to prices as just a few weeks of injections remain.
    NG futures gave back some recent gains and quickly dropped by 10c, but started recovering slowly, currently at $3.99 for November.

    90 bcf injection last week was historically high number (last year was 65). However considering that the weather was nearly perfect for free cooling economizers in major air-conditioning systems in northern states, this number is below 100-120 that could be, if production was growing really high. It is hard to say about supply/demand balance at this point, we'll see later.

    Despite about 6 weeks with injections to remain historically the majority of injections should occur in the next 4 weeks. However based on the weather forecast the benign temperatures will continue for the next 2 weeks and then the cold should arrive. So I expect ~90 bcf weekly injections in the next 2 reports following by drop to ~40 bcf. If that happens, the inventories may come to 3.3-3.4 tcf by the start of the heating season.
    With that in mind I reduced my forecast from 3.5 tcf to 3.4 tcf. This should support NG prices in the 4.0-4.5 range by the mid of October. Winter prices will depend on the winter forecast.

    Oil futures dropped by $1.12 to currently 93.30. As expected it develops the right shoulder in the head and shoulder bottom. Potential downside shoudl be limited to 92.5-93. If that completes and oil starts rising again, it should finally break out to 95-100 level and stay there.

  • Investors had no doubts about safety of the dividend, but speculators were questioning daily, with no reasons. The first bear argument is eliminated. More to come. Next Tuesday we'll see the final update, and after that-financial restatements with Q2 results and CC in the following 2-3 weeks. Not much time left to wait.
    Also looking forward to the phase 2 asset disposition announcement sometimes in the next 4 weeks with completion by the end of the year. It is the time. GLTAL
    PWE, staying the course

    Sentiment: Strong Buy

  • Reply to

    PGH near 52 weeks lows

    by kptran01 Sep 12, 2014 2:22 PM
    mrpev mrpev Sep 12, 2014 9:05 PM Flag

    I have no strong opinion on PGH, but PWE has the visible catalyst - substantial debt reduction and start in production growth at much higher efficiency.
    As for valuation PGH has revenue/debt ratio of 0.8. may improve a little bit next year. it is very low and restricts multiple expansion.
    PWE has same metric ~1.0 (roughly). After Phase 2 asset sale, assuming 1 bln debt reduction and slight production reduction PWE should come to 1.8 or better by Q1 or Q2. So it will deserve much higher multiples

  • Reply to

    OPEC hasn't dissolved

    by nelson20847 Sep 12, 2014 9:55 AM
    mrpev mrpev Sep 12, 2014 8:56 PM Flag

    European industrial production was up 1% last month in today's report. Only Italy was the major drag.
    Opec does not want to control oil prices. They agree even to lower marking share and influence in exchange for higher prices. Unlike in prior years they don't want selling cheaper oil just to maintain market share.

  • Reply to

    It's pretty simple

    by value_detective Sep 12, 2014 12:32 PM
    mrpev mrpev Sep 12, 2014 8:50 PM Flag

    Harry, I agree accounting issue is fully discounted, but week oil prices put breaks on the stock rebound. All oil stocks, even large ones owned by large institutions were very weak recently.
    Unlike NG oil is currently trades on charts only. Based on technicals my best guess - oil should rebound to 95-96, then retreat back to 93-94 creating the 2nd shoulder in a head and shoulder bottom. Then it should rise to 95-100 range. Again this is JMHO.

    Sentiment: Strong Buy

  • Reply to

    Dead investors do better then traders

    by nelson20847 Sep 10, 2014 3:23 PM
    mrpev mrpev Sep 10, 2014 9:42 PM Flag

    You don't need to substruct entire goodwill. It would be worse than a wosrt case scenario. We need just wait max month, hopefully a lttle bit less to get finances in order. I'm not saying PWE is out of the woods. They may adjust their previous growth plan based on possibly slightly higher expected expenses due to new accounting. Maybe not. Regardless PWE is very close to start growing after final asset sale. And the biggest goal for investment is buying at the current discount to book to sell at a premium later.
    I'm in Toronto for a business now. Besr wishes to everyone from very rainy Toronto

    Sentiment: Strong Buy

  • Consistent with recent few weeks that were back 79, 75. 88, 78, 82..
    Stocks stood at 2.709 tcf or 14.8% and 15.4% below last year and 5-year average respectively.
    We still have some cushion of 471 bcf and 495 bcf relative to last year and 5-year average. The gap has almost stopped narrowing during last 4 weeks, just 35 bcf which is not essential. And the weather has been much cooler. This suggests that demand other than weather related is growing.

    Please note that inventory levels last year and 5-year average were extremely high due to much warmer winter (excluding last year) compared to 40-year average.
    There are 8 weeks of major injections left plus 2-3 weeks of very low changes depending on weather.

    My baseline scenario remains the same - 3.5 tcf inventory level by the beginning of the heating season supporting NG prices in the 4.0-4.3 range. If we get above 3.5, NG prices will likely fall, but if we get 3.3-3.5 - prices will likely rise up to $5 by December. Winter forecast will make a great affect before it will actually starts. As the PWE investors we look forward to get the maximum from the Phase 2 asset disposition by the end of the year. GLTAL

    Sentiment: Strong Buy

  • Reply to

    Oil: 95.87 currently

    by mrpev Aug 29, 2014 4:13 PM
    mrpev mrpev Sep 3, 2014 3:32 PM Flag

    Oil was down huge 3.08 yesterday, but gained majority back today, up 2.52 despite ceasefire claimed by Ukrainian government. Interestingly that in the last 3 days despite huge losses yesterday oil is actually up by 85c.
    It seems oil has bottomed at 93, and traders feel euro has stopped going down hoping for QE from ECB tomorrow. I will be a little bit surprised if Draggi will give such a carrot as it would not help the European economy, but we shall see.

  • This contributes to all major commmodity fall-oil, NG, gold, siver.
    Unlike previos weeks the euro is very slightly lower. The majority of weakness comes from BP and Yen, next A$ and C$.
    USD still has room to rise to 84 and 85-last year high, and before that-back to the mid of 2010. If so, euro would drop to 1.28 and perhaps even 1.20 with the help of ECB.
    I'm holding (with some index hedges), but not buying anything. GLTAL

  • mrpev mrpev Aug 29, 2014 8:06 PM Flag

    Susan Rice

  • Up $1.32. It entered 95-100 range rather quickly. Frankly I did not expect so fast.
    I wouldn't too quick to call it due to geo political. We'll see later. May learn some extra details next week.
    Oil even toughed the strong technical resistance of 96 today. Breaking 96 would be a big deal in the short term. That would clear the path to 98 which should support excellent Q3 results.

    PWE decided to sell oil at market prices with no hedges. Few companies implement such strategy as it involves extra risks, at least not highly leveraged with debts. PWE decision confirms their confidence to deliver free cash flow in a relatively wide range of oil prices.
    Have a safe holiday. GLTAL
    PWE, staying the course

    Sentiment: Strong Buy

  • mrpev mrpev Aug 29, 2014 11:01 AM Flag

    Ed, I'd be very surprised if Russia would use oil/NG prices as a weapon. It is not their goal. They already implemented similar sanction as US-restriction on IMPORTS, not exports. They need to sell oil and gas.
    Their goal is to take some eastern Ukrainian territories to connect Crimea to the main Russia, otherwise they would need to build very expensive bridges over the sea. They will take those territories for sure, it is not matter of if, but rather when. Entire Russia supports Putin as those territories are pure Russians' with almost 100% Russian population who speaks only Russian language and don't know Ukrainian language. Crimea never belonged to Ukraine. It was given to them by Khrushchev about 50 years ago just because he was originally from Ukraine. At that time it did not matter and nobody cared. But now the entire Russia cares. The entire country supports Putin and agrees to deep recession or even depression , but wants those territories and their own people back to Russia. And here's nothing Obama, Merkel and Cameron can do. Germans wanted to ruin the Berlin wall and Russia agreed with it. Now Putin wants Merkel to agree with joining Russian territories. She does not.

    Russia is not Iraq or Iran, and military action is not an option especially if Russia has the most powerful nuclear weapons in the world according to Putin, and I tend to believe him. Russia has veto power in the UN Sec Council and also some support from China.
    I definitely don't support Putin's action, but this is the true situation. IMHO the best solution would be for Ukraine to negotiate selling those eastern territories to Russia peacefully and stop the war. It would help Ukraine economically and allow moving into EU and possibly NATO.
    Bottom line. I still remain in my $95-100 range oil call for now at least until we see more sanctions from US and Europe. Obama indicated they are coming in the yesterday's speech.

  • mrpev mrpev Aug 28, 2014 5:58 PM Flag

    I don't think Russia will cut oil/gas supply. They did not do it during the Cold War in 70's when they did not care about anyone, and it is more unlikely they will do it now. they want to punish Ukraine only, not the western Europe. They have started oil supply by tankers through Black sea for the same reason.
    But they will very unlikely cut supply to Europe. In fact they try to find a solution bypassing US sanctions. They started accepting payments for oil in rubbles and yuans instead of USD as US banks cannot lend USDs for Russian oil purchase.
    As far as their depression, their highest expansion is far worse than our great recession in terms of the cost of living, and they have some extra resources by nationalizing assets of oligarchs. They have great experience in that.

  • Reply to

    NG weekly 8/22: +75 bcf

    by mrpev Aug 28, 2014 10:51 AM
    mrpev mrpev Aug 28, 2014 4:17 PM Flag

    After the morning spike followed by selling to 3.98 NG managed to close at 4.05, still up 5c.
    Technically this is the highest close since mid July with more room to the upside.
    Fundamentally We have ~500 bcf cushion in low inventory level vs. cooler than average weather. I have no strong opinion, but I'd put 65/35 chance for NG rise to continue based on my expectations of ~3.5 tcf inventory levels by the beginning of the heating season which is ~500 bcf lower than last year. With the average winter this should keep NG prices in the $4-$5 range. This is for now. GL

    P.S. I wouldn't suggest playing UNG higher than 23 as it includes futures that will depreciate in time so UNG could rise slower than actual commodity.

  • Reply to

    yesturday selling was exhausted at 7.68

    by harrytcpw Aug 28, 2014 9:39 AM
    mrpev mrpev Aug 28, 2014 12:12 PM Flag

    7.80 was the strong support on 7/30. Now it is the strong resistance. We tested it and even above yesterday. A few more times of testing even on average volumes will weaken that level. Sooner or later PWE will pass that level. Still a strong buy at these levels. it will be seen as a short term blip next year IMHO.

    Sentiment: Strong Buy

  • Reply to

    next update every 2 weeks

    by harrytcpw Aug 28, 2014 10:44 AM
    mrpev mrpev Aug 28, 2014 12:07 PM Flag

    Thanks, makes sense. At this juncture the most important IMHO would be getting a price that would not reduce the book value.

  • Reply to

    PWE Summary

    by ador Aug 28, 2014 7:40 AM
    mrpev mrpev Aug 28, 2014 10:53 AM Flag

    Great, thanks

4.74-0.16(-3.27%)Oct 24 4:02 PMEDT

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