NEW YORK (TheStreet) -- Penn West Petroleum (PWE - Get Report) was falling 10.33% to $7.38 on Wednesday after the company announced it expects lower output in 2014 as it shuts down or sells some of its wells.
The company said it expects to average between 101,000 and 106,000 barrels of oil equivalent per day, which marks a decrease from its previous outlook of between 105,000 and 110,000 barrels. Penn West lowered its estimates after the company shut in 3,200 barrels of oil equivalent per day that it deemed unprofitable to produce.
Penn West is one of Canada's greatest producers of conventional oil. The company recently reached a production sharing agreement on properties that would produce 6,700 barrels of oil equivalent per day to raise $159.4 million but did not name partner in the deal, according to Reuters. The site reports that this is part of new CEO Dave Roberts' plan to sell nearly $2 billion Canadian in assets in order to change operations.
TheStreet Ratings team rates Penn West as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate PENN WEST PETROLEUM LTD (PWE) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PENN WEST PETROLEUM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- PWE has underperformed the S&P 500 Index, declining 19.72% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- PENN WEST PETROLEUM LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, PENN WEST PETROLEUM LTD reported lower earnings of $0.37 versus $1.37 in the prior year.
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.
- The gross profit margin for PENN WEST PETROLEUM LTD is rather high; currently it is at 60.85%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.57% trails the industry average.
- You can view the full analysis from the report here: PWE Ratings Report