Hi EKS,
Funny you mention Penn West -- I was digging into Lone Pine Resources (LPR) and I noticed it as well. I agree with you and think the PWE assets are wonderful, but I'm too chicken about the leverage and the fact that they appear to be "burning the furniture to heat the house," so to speak, by continuing to pay out the dividend by selling assets + cutting back on development CapEx.
My thought here was to buy when they announce that they're stopping the dividend -- the shareholder base appears to be retail-heavy given the enviable dividend history, so I figure this will see some highly irrational selling if/when that happens. If it doesn't happen, I'm OK with missing out.
Do you (or others) have any other thoughts on the name?
Side Note: Has anybody else looked into LPR? It's a spin-off (via IPO + Distribution) from Forest in 2011... couldn't have been worse timing. +80% NatGas exposure, <20% Oil... plus the oil is Edmonton Par, so realized prices are a $20/bbl discount to WTI due to the lack of a good pipeline from Alberta to the Gulf. Depending on whether the Company is able to sell assets or JV its oil-rich Evi lands, it may be headed into either bankruptcy or a +300% return. Clearly it's at a deep, deep discount to its PV10, but I trust those reserve #'s about as much as I trusted subprime mortgage originators' residuals :) [i.e. more assumption inputs than a millipede has legs].
- Afed |
