In 2015, shares of Penn West Petroleum (PWE) are down more than 75% and they currently trade at around $0.50 per share. As a result, earlier this month, Penn West received a notification from the New York Stock Exchange regarding the delisting of the stock and suspension of trading since it is now in penny stock territory. Now, if its stock price does not climb to $1 “on the last trading day of any calendar month, and its average closing share price in the 30 days preceding was also at least $1,” the NYSE will delist the stock. Now, to meet the NYSE’s criteria, Penn West needs to deliver around 50% upside in the next few months, which seems highly unlikely in light of the current oil environment. However, Penn West has hinted that it will …show more content…
As shown in the chart above, Penn West expects its costs to go down by another 10% with respect to drilling and completion. On the other hand, the company is also taking steps to reduce its selling, general, and administrative overheads. For instance, Penn plans to reduce its workforce by 35%, a move that will help it save $45 million. Also, it has suspended its quarterly dividend for an indefinite period, and expects this move to help it save $20 million annually. Aggressively reducing the debt In the past two years, Penn West has divested an estimated 30,000 barrels of oil equivalent per day worth of non-core assets for proceeds of approximately $1.5 billion. This has allowed the company to reduce its debt impressively in the past two years as shown in the following chart. Source: Penn West investor relations As a result of this aggressive debt reduction moves, Penn West has brought down its debt to EBITDA multiple to 3.2x, which is lower than the 5x limit imposed by its lenders. However, Penn West will have to sustain its aggressive rate of debt reduction as the covenant limits will continue dropping going