Debt-heavy Penn West posts $728-million loss

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Penn West Petroleum Ltd., still carrying a heavy pile of debt, posted a substantial loss in the most recent quarter, although it was able to bring down costs as it restructures its operations.

The Calgary-based energy outfit lost $728-million in the fourth quarter, compared to $78-million in the same frame last year. Penn West attributed the loss to unusual charges tied to a $790-million impairment charge tied to selling natural gas assets last year, as well as a write-down on assets in Manitoba.

Penn West is working to sell some of its land in order to further clean up its financial position, although the company was vague about its prospects. It did, however, outline its cost-cutting measures, noting the new leadership has been harsh as it tries to save money.

"We have, candidly, hit this place with a sledgehammer in the first six months that we have been here," Penn West chief executive David Roberts said on the company's quarterly conference call, according to the transcript. "I think now we're going to go at this stuff with a lot more precision. I do believe that there are a lot more cost savings that we can take out of the business."

The company, which wants to focus on light oil in western Canada, said it lowered its operating costs by $166-million and general and administrative expenses by about $12-million year-over-year. Roughly 66 per cent of the drop in operating expenses is tied to asset sales and other efforts, the company said. Penn West said it is about 33 per cent smaller than it was at the beginning of 2013. Quarter cash costs dropped about 26 per cent, or more than $135-million, in the year, the company said.

"As we continue to execute on the long-term plan, focusing on reducing these costs further and improving the overall profitability of the enterprise remains critically important," Clayton Paradis, Penn West's investor relations manager, said on the call.

Penn West declined to give detailed information about its asset sales, but believes its properties are more desirable than the land its competitors are trying to offload. "We've got several things running in the marketplace," Mr. Roberts said. "We are actually growing in confidence because, candidly, there is not a lot of stuff on the marketplace, nothing that is comparable to the quality of the assets that we have in this space right now."

The company's said much of its quarterly loss, which translated to $1.49 per share, was due to a non-cash property, plant, and equipment charge of $742-million related to natural gas assets, and a goodwill writedown of $48-million due to lower reserve recoveries in Manitoba. It also pointed to unrealized foreign exchange losses tied to debt.

With files from Canadian Press