Batman, some of the shorts are mixing two unrelated items and they want to take credit for both of those items even though only one of them is correct. Prior to the change at the Board and management level, Penn West had plenty of issues. I looked at the company closely in 2011 when they were trading in the $20s and I passed on it due to a number of red flags such as debt funded dividend and high production costs, thus shorting it at that time was short for those inclined to invest on the short side. However the decline in 2015 is completely different and was not caused internally.
I rekindled my interest in the company in mid-2013 after the Board and management re-shuffle and decided to give them a year before proceeding with an investment; the new team certainly delivered. If you look at Penn West 2014 results you will see that they reduced debt, divested many non-core assets, cut the dividend, cut G&A and operational costs and achieved sustainability with 102% payout ration in 2014 despite a weak Q4. Thus, factors that were dragging the company in prior years were removed and hence the coast was clear for a re-pricing of the equity. If the oil market held up in the $90s or even $80s (their original business plan price) this company would have been trading in the teens now. The collapse in oil prices changed all of that, thus the shorts and trolls that you see now are coming out of the woodwork claiming victory, which is of course nothing but dumb luck, as they say even a broken clock is right twice a day.
Many attack Dave for not hedging, but hedging is not a long term solution (check with PGF or TBE see how is hedging working for them?) hedging would have contributed to NAV by generating additional cash flow in 2015 and maybe bought them 6 more months with creditors, but hedging wont have solved the balance sheet issues since hedging wont have changed the valuation in the asset market. In hindsight Penn West should have accelerated their asset sales in 2013 and 2014, however they had very little short term debt by 2H-2014 and thus liquidating more assets would have meant sitting on plenty of cash to pay bonds that would mature years in the future, hence management paced asset sales over a long time frame, and we know what happened afterword.
Most of those so called shorts, trolls who are attacking me, the management and the Board are just armchair coaches. I have not seen them produce any analysis worthy of consideration, the only factor that continues to underpin their position is a weak oil price, which is in the process of bottoming, within 12 to 18 months after the oil market comes back and Penn West revalues higher by itself (or possibly in a merger with another company) those nameless individuals will go back to what they started with: digital pixels of dust on my computer monitor.
Regards,
Nawar
