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Penn West on verge of showing hand on new organization
Gary Park Petroleum News Calgary correspondent
The liveliest guessing game in the Canadian oil patch — whether senior producer Penn West Petroleum will end months of speculation and convert itself into one of the largest energy trusts — could soon be resolved.
With institutional investors clamoring for the change and analysts counting on a decision as early as this month, the Calgary-based E&P independent is believed to be close to wrapping up a year-long study of its future.
In late March, when Penn West cancelled its May annual meeting, President William Andrew said three options were on the table: Converting to a trust, selling or merging the company, or remaining an independent.
He suggested the company would have a clearer picture of its future plans by the time of its scheduled annual meeting. Four weeks later the meeting was postponed because of what Andrew described as a “tight timeline” and has now been set for Aug. 20.
Among analysts such as Gordon Zive, of RBC Energy Fund, that was all clear proof “something is happening ... they wouldn’t delay unless they were trying to iron out last details.” Beneficial to shareholders While the waiting continues, Peters & Co. analysts Brian Prokop and Jeff Martin said the Penn West review will likely conclude a trust conversion is beneficial to shareholders, given their own assumption that if most assets are moved to a trust, share values, which have jumped about 50 percent in the past year, could make another surge.
Prokop believes the trust portion could be worth C$62.80 a unit, while any exploration and other properties kept out of the trust might be valued at C$11.20 — for a C$74 total, compared with recent trading in the C$66 range.
The current betting favors a trust conversion, but if a sale occurs the focus is on Canadian Natural Resources, where Penn West Chairman Murray Edwards is a key shareholder and member of the board of directors.
Penn West currently produces about 55,000 barrels per day of oil and 336 million cubic feet per day of gas, while controlling 5.3 million net acres of undeveloped land. It has targeted capital spending this year of C$600 million-$700 million.
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