Penn West Petroleum (PWE) Stock Is Up Today Depite Lowering Dividend

NEW YORK (TheStreet) -- Shares of Penn West Petroleum (PWE) were gaining 1.5% to $2.05 in morning trading Wednesday after the oil company announced it will lower its dividend and reduce its capital budget for 2015 due to declining oil prices.

Starting in the first quarter of 2015 Penn West will reduce its quarterly dividend to 3 Canadian cents from 14 Canadian cents. The company also announced it will suspend its Dividend Reinvestment Plan starting with its first quarter 2015 dividend.

Penn West reduced its 2015 capital budget to C$625 million from C$840 million.

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"Penn West's business model assumes a conservative long run-term commodity price, however, the recent downturn falls outside our lowest probabilistic expectations," CEO Dave Roberts said in a statement.

TheStreet Ratings team rates PENN WEST PETROLEUM LTD 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 some concerns, 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 feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PENN WEST PETROLEUM LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.77 versus $0.37 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 144.1% when compared to the same quarter one year ago, falling from $34.00 million to -$15.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 74.28%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 142.85% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • PWE, with its decline in revenue, slightly underperformed the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 14.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: PWE Ratings Report

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