Friday, November 8, 2013

Penn West fears were grounded in reality

Yesterday Penn West Exploration (PWT) announced plans to shrink the company to grow the company. When I heard this I was elated. For years I have felt PWT was a bloated behemoth which had grown to an immense size thanks to an appetite for overpriced resources in western Canada.

Trimming this company sounds good to me -- I believe, up to 2 billion in assets are on the block. A check around the Web shows lots of support for PWT's new direction. And yet, despite all the good vibes surrounding the move, some analysts are calling for a target price of of less than 50-cents above today trading price of about $9.00.

I figure, if you've got PWT, keep it. This is a hold. For me, this is not the time to buy. I may be wrong. I may be too conservative but I want to watch how all this plays out or unravels.

If you bought PWT when it was a high flying income trust, you have my sympathies. I fear PWT may never trade in the high twenties again. Certainly those days will not return for many years. If you bought shares recently, you may be O.K. You may yet recoup your losses. Let's keep out fingers crossed that the dividend does not have to be cut, that the assets sales bring in the envisioned cash and that a rebound, at least a little one, will be in place by 2016.

It's a long time to keep one's fingers crossed.

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