Penn West Cuts Dividend 80%, Now Yields 6%

Penn West (NYSE: PWE) surprised no one on Wednesday when it decided to lower its dividend and cut its capex budget. I had warned of this possibility in a recent article where I suggested that Penn West was facing a serious funding gap due to its weak hedging and the current lower oil prices. Shares of Penn West have been crushed YTD, down as 75%, generally following moves in oil prices.PWE data by YChartsDividend cut 80% to $0.03 per shareLet us first look at the dividend. Penn West has lowered its quarterly dividend by 80%, from $0.14 per share to $0.03 per share. This new rate will start in Q1 2015, subject to Board review and approval. In lowering its dividend, Penn West will be saving an estimated $160M in cash per year, from around $220M (net of DRIP) to $60M.On a related note, Penn West will be suspending its DRIP program. Via this program, shareholders, if they elected to, were able to purchase shares of Penn West using their cash dividends. Now, shareholders enrolled in the DRIP will receive cash dividends.Updated 2015 guidanceLastly, let us discuss Penn West's 2015 outlook. As shown below, the company will be impacted severely by the fall in oil prices.Of note, Penn West's production is expected to fall 5% from its previous guidance to 90K to 100K BOE/D. This decline includes around 2K BOE/D of forecasted shut-in production which is now uneconomic.Capex budget lowered by 26% to $625MFurthermore, Penn West has announced a revised capital budget. The new budget will be... Read more

Older articles featuring PWE: