Thursday, September 10, 2009

Penn West Energy Trust

I am reviewing this stock (TSX-PWT.UN; NYSE-PWE) today as I have not yet reviewed it and the 2008 year end annual statement has came in. I also own this stock. I bought this stock in January 1998 and according to Quicken, I have made 6.7% return per year on this stock. This is purely a play on oil and gas in Alberta. As such, I have very little of it, but it keeps me informed about oil and gas in Alberta.

Most growth figures on this company are not bad. However, when you look at growth in dividends, you should note that the dividends on this stock, as with a lot of oil and gas stock go up and down, depending on what the company is earning. The earnings of this company depend on the price of oil and gas. So the recent cut in dividends does not mean much, because the prices of oil and gas are down.

The other thing to mention is this company has gone through a number of changes since I bought it. The stock I started with was Maximum Energy Trust. My spreadsheet reflects the changes in the stock I bought. If you have bought another fund that had ended up as Penn West, you might have a different result that what I have. I do not have a history of Penn West; I only have a history of the stock I bought.

As with other Income Trust stock, I have separated the Distributable Income and the ratios concerning DI off from the rest of the spreadsheet. Some people think that DI is more important than earnings; however, this is fine as long as you do not confuse the two. When comparing stocks, you must compare apples to apples, so never compare DI and earnings (EPS) as they are very different.

When looking at this stock concerning total growth, that is stock price and dividends, it has had not grown over the last 5 years. This is because the current price is about half of what it was 5 years ago. If you look at this growth over the past 10 years, the figures is 45% growth per year. Dividends have been good and the stock price has grown over this 10 year period. However, I must again caution that these figures concern the stock I own and the changes it has been though. Also note that dividend payments in past years have added a lot to this stock.

The Liquidity Ratio was only 1.04 at the end of 2008. It is now a better 1.24. Not as high as I would like this ratio to be, but the current liabilities can be covered by the current assets. The Asset/Liability Ratio has been consistently high and over 1.50 and this is good.

Probably the last thing to talk about today is the Return on Equity (ROE). This has been very inconsistent and was quite high at 16.2% at the end of 2008, with a 5 year average of 12.2%. For the latest quarter of June 2009, there is no ROE as the stock lost money. This has brought the 5 year average down to just 8.4%. I expect that this stock will continue to be inconsistent in its ROE. The price of oil and gas does fluctuate a lot. By having this stock, it helps me keep track of the oil and gas business in Alberta, which I think is very important to the Canadian economy.

It is the largest conventional oil and natural gas producing trust in North America. They operate only in Alberta. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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