Penn West Petroleum Ltd (USA) (NYSE:PWE) Financial Covenants A Point Of Concern On Low Oil Prices


Dallas, Texas 07/07/2015 (Financialstrend) – Beleaguered oil producer, Penn West Petroleum Ltd (USA) (NYSE:PWE) continues to plunge in the market amidst the ongoing decline in oil prices that once threatened to sink into bankruptcy. The company has seen its fortunes in the energy sector turn sour, having seen its marginal assets lose a substantial amount of value over the past year.

 Sell Rating

Penn West Petroleum Ltd (USA) (NYSE:PWE) was forced to renegotiate its financial covenants as the effects of the decline in oil prices threatened its liquidity to a point of near collapse.  The uncertainty in the industry has reduced the stock to a speculative play in the hope that oil prices will rebound soon.

TheStreet Research firm rates the stock as a ‘Sell’ citing concerns over Penn West Petroleum Ltd (USA) (NYSE:PWE)’s deteriorating net income as well as a disappointing return on equity. Penn West continues to struggle with weak operating cash flow as well as feeble growth in earnings per share since oil prices resorted to the downward trend.

Some investors are remaining bullish over Penn West Petroleum Ltd (USA) (NYSE:PWE) long term prospects having already renegotiated its financial covenants. However, the agreement only kicks in additional debt into the company whose effect will be felt starting next year.

Concerns Over Oil Prices

Resorting to sell assets to cater for debt obligations has come with its fair amount problems for the producer. The Move has only resulted in a decline in oil output significantly affecting Penn West Petroleum Ltd (USA) (NYSE:PWE) revenues and cash flow. The company’s output is already down by 15% this year alone resulting in a 58% decline in funds flows.

It is still unclear for how long the oil prices will continue dropping, expected to have more pressure on Penn West Petroleum Ltd (USA) (NYSE:PWE) earnings going forward. Should oil prices remain suppressed at the current levels, the company is expected to renegotiate its financial covenants once they expire next year.

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