Penn West Petroleum Ltd (USA) (PWE), Encana Corporation (USA) (ECA): A Cheap Canadian E&P Company for Your Portfolio

Page 1 of 2

Since the first quarter of 2011, Penn West Petroleum Ltd (USA) (NYSE:PWE) has experienced a significant decline from more than $28.50 per share in March 2011 to only $10.80 per share at the time of writing. In the first quarter of 2013, several famous investors including Jean-Marie Eveillard, Steven Cohen, Jim Simons, and Chuck Royce either added or initiated long positions in the company. Jean-Marie Eveillard owns nearly 36.5 million shares, accounting for a 7.5% stake in the company. Let’s take a closer look to determine how attractive is this company as an investment.

Penn West Petroleum Ltd (USA) (NYSE:PWE)

Good asset potential with ongoing business restructuring

Penn West Petroleum Ltd (USA) (NYSE:PWE) is a Canadian exploration and production company, having around 5.7 million net acres of land, with 445 million BOE in its total proved reserves and about 676 million BOE in proved and probable (2P) reserves. In 2012, the company replaced as much as 190% of the year’s production and grew its 2P reserve by 7%. The company calculated that its NPV of reserves stayed around $9.1 billion.

Penn West Petroleum Ltd (USA) (NYSE:PWE)’s near-term strategy is worth watching as it looks to divest around $1 billion to $1.5 billion of its non-core assets. For the full year 2013, the company plans to have a base capital spending of $900 million and a conditional additional capital of $300 million. With that investment amount, Penn West Petroleum Ltd (USA) (NYSE:PWE) estimates to produce around 135 to 145 mboe per day (64% liquid) with the project IRR threshold minimum of 20%.

Moreover, under the new management, Penn West Petroleum Ltd (USA) (NYSE:PWE) has been trying very hard to slash its costs and improve operational efficiency. The market values Penn West Petroleum Ltd (USA) (NYSE:PWE) at 5.3 times its trailing EBITDA (earnings before interest, taxes, depreciation, and amortization), and only 60% of its book value. Moreover, investors could get a juicy dividend yield of around 5.1%.

Has the lowest price-to-book ratio compared to its peers

Compared to its peers Encana Corporation (USA) (NYSE:ECA) and Suncor Energy Inc. (USA) (NYSE:SU), Penn West has the lowest price-to-book value ratio among the three companies. The market values Encana Corporation (USA) (NYSE:ECA) at 11.5 times its trailing EBITDA and as high as 2.67 times its book value. Encana Corporation (USA) (NYSE:ECA) has around 10.9 million net acres of land with total proved reserves of 13.1 tcfe (or around 2.15 billion BOE). This year, Encana Corporation (USA) (NYSE:ECA) also intends to divest as much as $500 million to $1 billion of assets to fund the operation of its most profitable assets.

Encana Corporation (USA) (NYSE:ECA) has a weaker balance sheet than Penn West. As of March 2013, it had $4.7 billion in equity, nearly $2.88 billion in cash, and nearly $7.66 billion in both long and short-term debt. Encana Corporation (USA) (NYSE:ECA) plans to pay its 2013 debt maturity of $500 million with cash. The company has also committed to pay the dividend. At its current trading price, its forward annual dividend yield is also quite high at 4.7%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!