Bullish on Oil? Buy Penn West Petroleum

With oil prices moving higher since touching the multi-year lows back in February, energy stocks have staged an impressive recovery. While conservative investors may like buying defensive stocks like Exxon Mobil (XOM) or Chevron (CVX) to benefit from the rally, I think investors can benefit more if they time the rally correctly by buying speculative stocks. Companies like Penn West Petroleum (PWE) have faced the adverse effects of the crude crash, but a recovery in crude will also lead to stronger gains for such companies as compared to the defensive stocks.

As a result, investors who are bullish on oil and expect prices to continue surging should buy Penn West Petroleum to maximize their gains.

Aggressively focused on improving cash flow

The surge in oil prices in 2016 has aided shale oil producer Penn West Petroleum to achieve striking gains as the stock is up considerably this year.
However, the most important thing is that the rally in Penn West Petroleum’s share is not only an outcome of enhancement in oil prices, but the company has taken some smart steps to perform well in spite of low oil pricing atmosphere. This is the reason why Penn West Petroleum looks like a great investment right now.

Penn West Petroleum’s use of progressive drilling and accomplishment technologies, together with several cost reducing steps, has supported the company to produce robust savings of late. Penn West accomplished well savings of $300,000 for each well, which is fairly striking. Apart from this, Penn West is trying hard to expand its cash flow profile, which is why it is working aggressively to cut costs.

To fortify its cash flow, Penn West Petroleum has successfully managed to lower its capital expenses by 90 percent to $50 million this year. Furthermore, Penn West used up $470 million last year, $30 million less than its expected CapEx of $500. The company is totally focused on improving its cash flow rather than production.

This is a clever step as Penn West now has an inspiring asset base that will permit the company to decrease costs additionally and keep production at robust heights. As a matter of fact, regardless of almost expunging its capital budget for this year, Penn West will maintain its production level at 62,000 barrels of oil correspondent each day at the center of its guidance. This shows a drop of just 19 percent compared to its production level of 77,000 barrels in 2015.


Penn West Petroleum has the ability to perform well even in a weak pricing environment. However, with crude prices inching higher, Penn West should witness massive gains going forward. Thus, aggressive investors who are bullish on oil should consider Penn West so as to maximize their gains from the crude recovery.
Published on May 16, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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