Why Penn West Petroleum Ltd (USA) (NYSE:PWE) Shares Might Be In For A Decline

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Penn West Petroleum Ltd (USA) (NYSE:PWE) shares rose 17.24% to $0.840 on Monday but these gains might soon be returned.

Penn West Petroleum Ltd (USA) (NYSE:PWE) shares are trading in a 52-week range of $0.45 to $2.02, which means that the current share price is still closer to the bottom half of the range. The company has a market cap of $461.07 million at 502.16 million shares outstanding.

On Monday, JPMorgan announced a downgrade for the stock from “Underweight” to “Neutral” as the company is facing a looming deadline for its financial agreements by the end of this month. Penn West Petroleum has to be able to make amendments on these existing covenants or risk the possibility of default, as it has lost a lot of ground on weaker oil prices earlier in the year.

The company also saw its “Underperform” stock rating reaffirmed by Raymond James in a research report on Monday while RBC Capital lowered their target price on shares in mid-May.

For now, Penn West Petroleum is still in the middle of discussions with its lenders but the outcome of these talks could ultimately decide the fate of the company. Some analysts have remarked that there could be some upside from here on out as crude oil has already recovered from its $26/barrel lows in March to around $50/barrel these days, but others have noted that this commodity rebound already came too late.

Penn West Petroleum is is an exploration and production company that operates in the segment of exploring for, developing and holding interests in oil and natural gas properties, and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. The company owns the petroleum and natural gas assets or over 100% of the equity, directly or indirectly, of the entities that carry on the remainder of the oil and natural gas business of Penn West.

 

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.