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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!