More Pain For Penn West
The news coming out Penn West (NYSE:PWE) is rather grim. The company has just announced a series of actions which are all focused on it surviving the current period of lower commodity prices. From the press release:
we will limit our capital expenditures to funds flow from operations by year-end 2015
we will suspend our dividend and reduce board compensation
we will significantly reduce our cost structure through a 35% workforce reduction
Furthermore, CEO Dave Roberts added the following:
We continue to take concrete steps to strengthen our balance sheet,” said Dave Roberts, President and CEO of Penn West, “Limiting our capital programs to the funds flow generated from our assets and suspending our dividend are necessary steps. Building on a combination of process and efficiency improvements over the past 12 to 18 months, we are taking further actions today to significantly reduce our cost structure without impacting our ability to execute. We remain flexible and well positioned to move forward when oil prices improve.”
Make no mistake, these actions were necessary. Penn West has been living beyond its means for a long time, spending more on capital spending that it was bringing in via FFO.