1. finance
2. bank

I NS TITU T IO NA L E Q U ITY R E S E A RC H
Jeremy Kaliel
Serhiy Petrenko
Nick Corcoran
E A R N I N G S U P DA T E
j
Penn West Petroleum Ltd.
2015 Capex Reduced 26%; Dividend
Slashed By 79%
What's The Event
In light of the recent weakness in commodity prices, Penn West
announced today that it is reducing its 2015 capital budget by 26%
to $625MM from previous guidance of $840MM, and cutting its
monthly dividend by 79% to $0.03/share (from $0.14, previously).
While we had highlighted Penn West as a candidate for a potential
dividend cut (see our December 8th report entitled "Who's Next for
Dividend Cuts?") we acknowledge that the cut came sooner than we
expected. Nonetheless, we view the move as prudent given the
continued deterioration in commodity prices.
December 17, 2014
Oil & Gas - Dividend Corporations
SEC T O R PER F O R MER
M A R K ET WEI GH T
Stock Rating:
Sector Weighting:
Key Ratios and Statistics
12-18 mo. Price Target
PWT-TSX (12/16/14)
Key Indices:
3-5-Yr. EPS
Gr. Rate (E)
52-week
Range
Shares Outstanding
Float
Avg. Daily Trading Vol.
Market Capitalization
Dividend/Div Yield
Fiscal Year Ends
Net Asset Value
Reflecting reduced spending, Penn West has also decreased its 2015 2015 ROE (E)
production guidance by 5% to 90,000-100,000 Boe/d (from 95,000- LT Debt
105,000 Boe/d, previously). The company also suspended its
Net AssetEquity
Value
Common
dividend reinvestment plan (DRIP). After adjusting our forecasts
Convertible Available
(changes highlighted in Exhibit 1) in a $60 WTI environment we
estimate that Penn West's 2015E total payout ratio falls to 171%
CFPS
(from 229%, previously). Our 2015E Total D/CF for Penn West
Current
increases to 6.0 in 2015 at $60 WTI (from 5.6x, previously), but is
Prior
still above the company's 4.0x 12-month trailing total debt to
Estimates (Dec.
(Dec. 31)
31)
Valuation
EBITDA covenant. As such, unless commodity prices improve above P/CF-Curr
US$68/Bbl WTI in 2015 we would see additional asset sales as being P/CF-Prior
critical to balance sheet repair.
EV/DACF
2014E
Implications
2015E
We are maintaining our Sector Performer rating on Penn West with a 2016E
reduced price target of $7.00/share (from $8.25). The reduced price
target reflects the PV impact of PWT's slowed pace of development
on our Risked NAV, as well as a lowering of our target multiple to
0.6x to our NAV (from 0.7x) to account for PWT's additional balance
sheet risk in the current environment. Under forward strip pricing,
Penn West trades at a 2015E EV/DACF multiple of 7.6x and a
P/Risked NAV of 34% (versus the group averages of 7.1x and 97%,
respectively), while providing investors with a current cash yield of
5.1% (versus the group average of 9.5%).
$7.00
$2.35
S&P/TSX Energy Trust
NM
$2.27-$11.00
496.1M
NA Shrs
2,720,000
$1,165.8M
$0.12 / 5.1%
December
$4.62 per Shr
NM
$2,081.0M
$7.4B
Yes
2013
$2.03A
2014
$1.97E
2015
$1.61E
$1.63E
2016
$1.85E
$1.81E
1.2x
1.2x
1.5x
1.4x
1.3x
1.3x
3.0x
3.4x
2.8x
Company Description
Penn West converted from a trust to a dividend-paying corporation on
January 3, 2011.
www.pennwest.com
All figures in Canadian dollars, unless otherwise stated.
14-133476 © 2014
CIBC World Markets does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
See "Important Disclosures" section at the end of this report for important required disclosures, including potential
conflicts of interest. See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report,
where applicable.
Find CIBC research on Bloomberg, Reuters, firstcall.com
and ResearchCentral.cibcwm.com
CIBC World Markets Inc., P.O. Box 500, 161 Bay Street, Brookfield Place, Toronto, Canada M5J 2S8 (416) 594-7000
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Penn West Petroleum Ltd. (PWT - TSX)
Sector Performer
Current Price: C$2.35 (12/16/14)
12 To 18 Month Price Target: C$7.00
Dividend (NTM) / Freq. / Yield: $0.12 / mthly / 5.1%
Shares O/S(1): 496.1MM
Market Cap.: $1,166MM
Avg Vol (50 day): 2,720,000
SUMMARY & INVESTMENT THESIS
Jeremy Kaliel, MBA (403-260-8657), Jeremy.Kaliel@cibc.ca
Serhiy Petrenko, (403-221-5047), Serhiy.Petrenko@cibc.ca
Nick Corcoran, (403-260-8678), Nick.Corcoran@cibc.ca
PROPERTY OVERVIEW
Investment Thesis: We have a Sector Performer rating on Penn West Petroleum Ltd. with a 12-18 month
price target of $7.00/share. While we see tremendous latent value in PWT's assets, we believe that unlocking
of value in 2015 will rest primarily on the execution of key asset dispositions.
Potential Catalysts: Potential catalysts for Penn West include the potential unlocking of value from asset
sales, joint ventures, or a possible takeout (longer term). Operational updates demonstrating improved capital
efficiency will also be a focus.
Key Assets: Key assets for Penn West include tight oil plays in the Cardium (AB), tight carbonates on the
Slave Point and Swan Hills trends (AB), and Viking tight oil (SK & AB). Other notable assets include its
exposure to the Duvernay (AB), heavy oil at Seal (AB), and the Spearfish play (MB).
Relative Valuation: Penn West is currently trading at a Price to Risked NAV ratio of 20% and a 2015E
EV/DACF multiple of 3.4x (versus the group averages of 50% and 5.0x, respectively) while providing a
current yield of 5.1% (versus the group average of 9.5%). Our 12-18 month price target of $7.00/share is
based on a 0.6x target multiple to our Risked NAV (less forecast dividends of $0.12/share) versus the group
average of 1.0x.
PRODUCTION & RESERVES GROWTH
Production Growth (Per Share)
Reserves Growth (Per Share)
2P Reserves - MMboe (PWT)
RPS Growth (PWT)
RPS Growth (Avg)
Production (PWT)
PPS Growth (PWT)
PPS Growth (Avg)
Production (Boe/d)
CFPS (Basic)
2014E
2015E
2014E
110,795A
96,500E
$0.55A
106,706A
94,000E
$0.61A
100,839A
93,000E
$0.47A
101,210E
96,520E
$0.34E
104,850E
95,000E
$1.97E
35%
30%
RELATIVE RISK & MAGNITUDE OF UNBOOKED PROSPECTS
2013A
2012A
2011A
2010A
2009A
2006A
(% change - YOY)
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
2008A
(Mmboe)
2015E
2014E
2013A
2012A
2011A
2010A
2009A
(boe/d)
Q1
Q2
Q3
Q4
FY
% Gas
800
700
600
500
400
300
200
100
0
2007A
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
(% change - YOY)
225,000
200,000
175,000
150,000
125,000
100,000
75,000
50,000
25,000
0
Reserves (MMBoe)
2013A +Net Acq.
Proved Developed Producing
299.0
299.0
Total Proved (1P)
415.0
415.0
Proved + Probable (2P)
625.0
625.0
PDP % of Total Proved
72%
72%
Total Proved % of P+P
66%
66%
2P Reserve Life - Years2
13.8
13.8
FD&A - 2P, incl. FDC
$175.25
3
Cash Recycle Ratio
0.1x
Reserve Engineers: Gilbert Laustsen Jung Associates Ltd.
2015E
$0.39E
$0.39E
$0.40E
$0.42E
$1.61E
DEBT & OUTFLOWS VS. INFLOWS
Debt Metrics
Name
David Roberts
David Dyck
Mark Fitzgerald
Position
President & CEO
SVP & CFO
SVP, Development
Name
S. Keith Luft
Greg Gegunde
Position
SVP & General Counsel
SVP, Exploitation
Cardinal
Peyto
ARC
Vermilion
Peyto
6.9x
Bonterra
Whitecap
TORC
Cardinal
Crescent Point
Average
Trilogy
5.0x 5.1x 5.2x 5.2x
Spyglass
99%
8.1x 8.3x 8.5x
5.5x 5.5x 5.8x 6.0x
Pengrowth
Vermilion
ARC
Bonterra
TORC
61%
Whitecap
Crescent…
Average
Pengrowth
Surge
49%50%51%51%
Journey
Enerplus
Baytex
Northern…
Surge
Bonavista
US$60/bbl
C$3.00/mcf
Baytex
CIBC Base
Cmdty Prices
3.7x 3.7x 4.0x 4.0x 4.1x 4.1x
Enerplus
US$100/bbl
C$5.00/mcf
US$50/bbl
C$4.00/mcf
Current
Price
3.1x 3.3x 3.4x
Lightstream
2.4x
CIBC Base
$0 Commodity Prices
42%45%45%
73%74%
63%68%
EV/DACF (2015E)
Long Run
Current
Price
Bonavista
Trilogy
Spyglass
Long Run
Twin Butte
Penn West
Lightstream
AET
Group
35%37%38%
Price
Target
Northern Blizzard
MANAGEMENT (Ownership: 0.3%)
Risked
NAV
20%
Penn West
US$100/bbl
$36.83 C$7.00/mcf
$30.65
Target
Price
33%
25%28%30%
Journey
Group avg Operating Netback
Group avg Cash Flow Netback
AET
Group
Gross Revenue (net trans)
$63.57
$25
Hedging Gains
(Losses)
2005
2006 2007 ($1.81)
2008
Royalties
$20 ($9.54)
Operating Costs
($19.08)
$15 $33.14
Operating Netback
G&A
$10 ($3.57)
Interest
($3.86)
$5 $0.00
Cap Tax/Other
Cash Flow Netback
$0 $25.71
$40
2015E Risked
$58.43 NAV
$30
($0.35)
2009
2010E 2011E
($8.36)
($19.50)
$20
$30.22
($3.50)
($3.57)
$0.00
$10
$23.15
87%
Twin Butte
(-15%)
$30 2014E
$50
PWT
Group
$40 2013 2014E 2015E
2012
AET
Group
2011
$35
PWT
Group
2010
AET
Group
2015E
$803
($625)
($60)
$0
$118
$142
($251)
$2,130
$2,021
2.5x
PWT
Group
PWT
Group
2009
$45
AET
Group
Cash Flow from Operations
Capital Spending6
Dividends
DRIP
Surplus (Deficit)
Working Capital Deficit
Bank Debt
Senior Notes/Other Debt
Net Debt at Year-end
Debt / CF (Y/E Debt, Year CF)
Total Credit Facility (Current)
Facility Utilized (Current)
25%
0%
Netback Analysis ($/Boe)
2011E
Financial Flexibility ($MM)
2014E
$973
($820)
($276)
$57
($67)
$160
($122)
$2,130
$2,168
2.2x
$1,700
($250)
25%
Price to Risked NAV
"Bluesky" NAV (unrisked)
Risked NAV
Core NAV
Core NAV
Target Price
$50
75%
(C$/Unit)
Credit Line Drawn (Group)
50%
50%
NAV
Risked NAV (C$/Share)
$60 RiskedPWT
$55
75%
100%
AET
Group
Credit Line Drawn (PWT)
Sustainability threshold
VALUATION SUMMARY5
125%
125%
100%
PWT
Group
2009 2010
2012 2008
2013 2014E2015E
2005
20062011
2007
2009 2010E
175%
150%
150%
PWT
Group
0
D/CF (Group)
200%
PWT
Group
AET
Group
PWT
Group
Avg.
D/CF (PWT)
Group PWT
Group
Avg. Group
AET
PWT
Group
Group
Group
PWT
Group
AET
PWT
Group
Group
Group
AET AET
Avg.
0
AET
PWT
Group
Group
2.0x
1.51.5x
1.0x
11.0x
0.5x
0.5x
0.50.0x
0.0x
Total Pay out Ratio
Inflow s v s. Outflow s (incl DRIP)
Basic Pay out Ratio
AET
Group
22.5x
1.5x
200%
1.5 125%
175%
1.25
150% 100%
125%
1 75%
100%
0.7550%
75%
50%
0.5 25%
25%
0%0.250%
% Credit Facility Utilized
3.5x
2.5
2.0x
3.0x
150%
Payout Ratios
Payout Ratios
Total Debt / Cash Flow
34.0x
2.5x
/ Cash
Total
FlowFlow
/ Cash
DebtDebt
Total
Outflows vs. Inflows4
D/CF (PWT)
(AET)
D/CF (Group)
Credit Line Draw n (PWT)
(AET)
Credit Line Draw n (Group)
% Credit Facility Utilized
% Credit Facility Utilized
3.0x
Key Valuation Metrics vs. Coverage Group (CIBC Estimates)6
Penn West
Group Average
Share
Price
$2.35
Expected
Return
203%
102%
2015E
Yield
5.1%
9.5%
2015E
P/CF
1.5x
3.6x
2015E
EV/DACF
3.4x
5.0x
P/Core
NAV
51%
115%
P/Risked
NAV
20%
50%
EV/
EV/2P
Production Reserves
($/Boe/d) ($/Boe)
$34,177
$5.43
$57,612
$12.11
1) Shares O/S = last quarterly balance (adjusted for equity issues). 2) Y/E P+P reserves divided by Q4 annualized production. 3) Cash netbacks divided by reported P+P FD&A cost, incl. FDC. 4) Basic payout ratio = total dividends (excluding the effect of DRIP) divided by cash flow, total payout = total CAPEX and dividends
(excluding the effect of DRIP) divided by cash flow. Inflows versus outflows is calculated as total CAPEX and dividends (INCLUDING the effect of DRIP) divided by cash flow. 5) Base commodity price assumptions are US$97.96/bbl (2013A), US$94.00/bbl (2014E), US$80.00/bbl (2015E), US$82.50 (2016E) and US$85.00/bbl
(long term) for WTI oil, and C$3.18/mcf (2013A), C$4.56/mcf (2014E), C$4.14/mcf (2015E), C$4.02/mcf (2016E) and C$4.33/mcf (long term) for AECO natural gas, with FX of $0.97 USD/Cdn (2013A), $0.91 USD/Cdn (2014E), $0.87 USD/Cdn (2015E & 2016E) and $0.90 USD/Cdn (LT). 6) Group averages are calculated
using our coverage universe of 16 companies. Source: Company reports and CIBC World Markets Inc.
2
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Exhibit 1. Penn West – Previous Vs. Revised Estimates (CIBC Base Commodity Assumptions)
2014E
2015E
2016E
2013A
Previous Revised % Change
Previous Revised % Change
Previous Revised % Change
Volumes
Crude Oil & NGLs (bbl/d)
85,097
68,057
68,057
0%
68,486
66,486
-3%
71,225
69,225
-3%
Natural Gas (mmcf/d)
300.0
220.8
220.8
0%
189.1
171.1
-10%
178.7
160.7
-10%
Boe/d (6:1)
135,093
104,850
104,850
0%
100,000
95,000
-5%
101,000
96,000
-5%
% Natural Gas
37%
35%
35%
32%
30%
29%
28%
Realized Prices
Before Hedging:
Crude Oil & NGLs (C$/bbl)
$79.94
$82.98
$83.07
0%
$72.99
$73.02
0%
$75.60
$75.63
0%
Natural Gas ($/mcf)
$3.31
$4.85
$4.85
0%
$4.34
$4.34
0%
$4.22
$4.22
0%
After Hedging:
Crude Oil & NGLs (C$/bbl)
$82.59
$84.44
$84.54
0%
$75.52
$75.52
0%
$78.10
$78.10
0%
Natural Gas ($/mcf)
$3.45
$4.42
$4.42
0%
$4.34
$4.34
0%
$4.22
$4.22
0%
Financial Summary ($millions except per unit)
Gross Revenue (net of hedging)
$2,837.0
$2,384.1
$2,386.2
0%
$2,112.6
$2,031.3
-4%
$2,247.0
$2,164.5
-4%
Cash Flow from Operations
$985.0
$970.9
$972.8
0%
$819.0
$802.8
-2%
$929.1
$932.8
0%
Cash Distributions
$397.0
$276.3
$276.3
0%
$281.7
$60.0
-79%
$287.6
$60.5
-79%
Development Expenditures
$704.0
$820.0
$820.0
0%
$840.0
$625.0
-26%
$840.0
$625.0
-26%
Total Debt (incl. converts)
$2,663.0
$2,169.9
$2,167.9
0%
$2,386.8
$2,020.5
-15%
$2,498.2
$1,743.7
-30%
Cash Flow per unit (basic)
$2.03
$1.97
$1.97
1%
$1.63
$1.61
-1%
$1.81
$1.85
2%
Cash Flow per unit (diluted)
$2.03
$1.97
$1.97
1%
$1.63
$1.61
-1%
$1.81
$1.85
2%
Cash Distributions per unit
$0.82
$0.56
$0.56
0%
$0.56
$0.12
-79%
$0.56
$0.12
-79%
Basic Payout Ratio
40%
28%
28%
0%
34%
7%
27%
31%
6%
24%
Total Payout Ratio
112%
113%
113%
0%
137%
85%
52%
121%
73%
48%
Total Payout Ratio (Incl. DRIP)
102%
107%
106%
0%
128%
85%
43%
114%
73%
41%
Average Units Outstanding (mm)
485.8
493.5
493.5
0%
503.1
499.8
-1%
513.6
503.8
-2%
Per BOE Analysis ($/boe)
Gross Revenue (net of hedging)
$57.83
$62.30
$62.35
0%
$57.88
$58.58
1%
$60.79
$61.60
1%
Royalties
($8.23)
($9.54)
($9.54)
0%
($8.26)
($8.36)
1%
($8.76)
($8.88)
1%
Transportation
($0.59)
($0.59)
($0.59)
0%
($0.50)
($0.50)
0%
($0.50)
($0.50)
0%
Operating Costs
($20.77)
($19.08)
($19.08)
0%
($19.50)
($19.50)
0%
($19.50)
($19.50)
0%
General & Administrative
($3.24)
($3.57)
($3.57)
0%
($3.50)
($3.50)
0%
($3.00)
($3.00)
0%
Interest, Capital Taxes and Other
($5.01)
($3.86)
($3.86)
0%
($3.68)
($3.57)
-3%
($3.89)
($3.18)
-18%
Cash Flow
$19.98
$25.66
$25.71
0%
$22.44
$23.15
3%
$25.13
$26.55
6%
Commodity Assumptions
Crude Oil - WTI (US$/bbl)
$97.96
$94.00
$80.00
$82.50
Crude Oil - Edmonton Par (C$/bbl)
$93.46
$95.37
$83.91
$86.78
Natural Gas - NYMEX (US$/mcf)
$3.72
$4.42
$4.00
$4.00
Natural Gas - AECO (C$/mcf)
$3.18
$4.56
$4.14
$4.02
Exchange Rate (US$/C$)
$0.97
$0.91
$0.87
$0.87
Note: Our base WTI crude oil assumptions are US$80.00/bbl for 2015E, $82.50/bbl for 2016E, and US$85.00/bbl in the long term. Source: Company reports and CIBC World Markets Inc.
Price Target Calculation
We calculate our 12 month price target of $7.00 for Penn West based on a 0.6x
target multiple to our Risked NAV (less forecast dividends of $0.12/share)
versus the group average at 1.0x.
Key Risks To Price Target
The primary risks to Penn West achieving our price target include a decline in
commodity prices, higher-than-expected production decline rates, and rising
industry costs.
3
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Our CFPS estimates are shown below:
4
1 Qtr.
2 Qtr.
3 Qtr.
4 Qtr.
Yearly
2013 Current
2014 Current
2015 Prior
2015 Current
$0.49A
$0.55A
$0.40E
$0.39E
$0.51A
$0.61A
$0.40E
$0.39E
$0.61A
$0.47A
$0.40E
$0.40E
$0.42A
$0.34E
$0.42E
$0.42E
$2.03A
$1.97E
$1.63E
$1.61E
2016 Prior
2016 Current
---
---
---
---
$1.81E
$1.85E
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
IMPORTANT DISCLOSURES:
Analyst Certification: Each CIBC World Markets research analyst named on the front page of this research report, or
at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein
accurately reflect such research analyst's personal views about the company and securities that are the subject of this
report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii)
no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by such research analyst in this report.
Potential Conflicts of Interest: Equity research analysts employed by CIBC World Markets are compensated from
revenues generated by various CIBC World Markets businesses, including the CIBC World Markets Investment Banking
Department. Research analysts do not receive compensation based upon revenues from specific investment banking
transactions. CIBC World Markets genera lly prohibits any research analyst and any member of his or her household from
executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets
generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that
such analyst covers.
In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report,
CIBC World Markets may have a long position of less than 1% or a short position or deal as principal in the securities
discussed herein, related securities or in options, futures or other derivative instruments based thereon.
Recipients of this report are advised that any or all of the foregoing arrangement s, as well as more specific disclosures
set forth below, may at times give rise to potential conflicts of interest.
Important Disclosure Footnotes for Penn West Petroleum Ltd. (PWT)
Penn West Petroleum Ltd. is a client for which a CIBC World Markets compa ny has performed investment
banking services in the past 12 months.
CIBC World Markets Inc. has received compensation for investment banking services from Penn West
Petroleum Ltd. in the past 12 months.
CIBC World Markets Inc. expects to receive or inte nds to seek compensation for investment banking
services from Penn West Petroleum Ltd. in the next 3 months.
CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially
own 1% or more of a class of equity securities issued by Penn West Petroleum Ltd.
Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered
by CIBC World Markets Inc.:
Stock Prices as of 12/17/2014:
ARC Resources Ltd. (2g, 7) (ARX-TSX, $25.96, Sector Performer)
Baytex Energy Corp. (2a, 2c, 2e, 2g) (BTE-TSX, $18.03, Sector Outperformer)
Bonavista Energy Corporation (2a, 2c, 2e, 2g, 7) (BNP -TSX, $7.55, Sector Outperformer)
Bonterra Energy Corp. (2g) (BNE-TSX, $39.19, Sector Outperformer)
Cardinal Energy Ltd. (2a, 2c, 2e, 2g) (CJ-TSX, $13.70, Sector Outperformer)
Crescent Point Energy Corp. (2a, 2c, 2e, 2g, 7) (CPG-TSX, $26.23, Sector Outperformer)
Enerplus Corporation (2g, 7) (ERF-TSX, $10.78, Sector Performer)
Journey Energy Inc. (2a, 2c, 2e, 2g) (JOY-TSX, $4.19, Sector Performer)
Lightstream Resources Ltd. (2g) (LTS-TSX, $1.36, Sector Underperformer)
Long Run Exploration Ltd. (2a, 2c, 2e, 2g) (LRE-TSX, $1.45, Sector Performer)
Northern Blizzard Resources Inc. (2a, 2c, 2e, 2g) (NBZ-TSX, $8.29, Sector Outperformer)
Pengrowth Energy Corporation (2g) (PGF-TSX, $3.58, Sector Performer)
Penn West Petroleum Ltd. (2a, 2e, 2g, 7) (PWT-TSX, $2.43, Sector Performer)
Peyto Exploration & Development Corp. (2a, 2c, 2e, 2g) (PEY-TSX, $35.19, Sector Outperformer)
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2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered
by CIBC World Markets Inc.: (Continued)
Stock Prices as of 12/17/2014:
Spyglass Resources Corp. (2g) (SGL-TSX, $0.37, Sector Underperformer)
Surge Energy Inc. (2a, 2c, 2e, 2g) (SGY-TSX, $3.98, Sector Performer)
TORC Oil & Gas Ltd. (2g, 7) (TOG-TSX, $7.78, Sector Outperformer)
Trilogy Energy Corp. (2g) (TET-TSX, $8.87, Sector Outperformer - Speculative)
Twin Butte Energy Ltd. (2a, 2e, 2g) (TBE-TSX, $0.87, Sector Performer)
Vermilion Energy Inc. (2g, 7) (VET-TSX, $51.59, Sector Performer)
Whitecap Resources Inc. (2a, 2c, 2e, 2g) (WCP -TSX, $11.90, Sector Outperformer)
Important disclosure footnotes that correspond to the footnotes in this table may be found in the "Key to
Important Disclosure Footnotes" section of this report.
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2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Key to Important Disclosure Footnotes:
1
2a
2b
2c
2d
CIBC World Markets Corp. makes a market in the securities of this company.
This company is a client for which a CIBC World Markets company has performed investment banking services
in the past 12 months.
CIBC World Markets Corp. has managed or co -managed a public offering of securities for this company in the
past 12 months.
CIBC World Markets Inc. has managed or co -managed a public offering of se curities for this company in the
past 12 months.
CIBC World Markets Corp. has received compensation for investment banking services from this company in
the past 12 months.
2e
CIBC World Markets Inc. has received compensation for investment banking services from this company in the
past 12 months.
2f
CIBC World Markets Corp. expects to receive or intends to seek compensation for investment banking services
from this company in the next 3 months.
CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services
from this company in the next 3 months.
2g
3a
This company is a client for which a CIBC World Markets company has performed non-investment banking,
securities-related services in the past 12 months .
3b
CIBC World Markets Corp. has received compensation for non-investment banking, securities-related services
from this company in the past 12 months.
CIBC World Markets Inc. has received compensation for non-investment banking, securities-related services
from this company in the past 12 months.
3c
4a
This company is a client for which a CIBC World Markets company has performed non-investment banking,
non-securities-related services in the past 12 months.
4b
CIBC World Markets Corp. has received compensation for non-investment banking, non-securities-related
services from this company in the past 12 months.
CIBC World Markets Inc. has received compensation for non-investment banking, non-securities-related
services from this company in the past 12 months.
The CIBC World Markets Corp. analyst(s) who covers this company also has a long position in its common
equity securities.
A member of the household of a CIBC World Markets Corp. research analyst who covers this company has a
long position in the common equity securities of this company.
The CIBC World Markets Inc. fundamental analyst(s) who covers this company also has a long position in its
common equity securities.
A member of the household of a CIBC World Markets Inc. fundamental research analyst who covers this
company has a long position in the common equity securities of this company.
CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1%
or more of a class of equity se curities issued by this company.
An executive of CIBC World Markets Inc. or any analyst involved in the preparation of this research report has
provided services to this company for remuneration in the past 12 months.
An executive committee member or director of Canadian Imperial Bank of Commerce (“CIBC”), the parent
company to CIBC World Markets Inc. and CIBC World Markets Corp., or a member of his/her household is an
officer, director or advisory board member of this company or one of its subsidiaries.
Canadian Imperial Bank of Commerce ("CIBC"), the parent company to CIBC World Markets Inc. and CIBC
World Markets Corp., has a significant credit relationship with this company.
4c
5a
5b
6a
6b
7
8
9
10
11
The equity securities of this company are restricted voting shares.
12
13
The equity securities of this company are subordinate voting shares.
The equity securities of this company are non-voting shares.
14
The equity securities of this company are limited voting shares.
7
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
CIBC World Markets Inc. Stock Rating System
Abbreviation
Rating
Description
SO
Sector Outperformer
Stock is expected to outperform the sector during the next 12-18 months.
SP
Sector Performer
Stock is expected to perform in line with the sector during the next 12-18 months.
SU
Sector Underperformer
Stock is expected to underperform the sector during the next 12-18 months.
NR
Not Rated
C IBC World Markets does not maintain an investment recommendation on the stock.
R
Restricted
C IBC World Markets is restricted (due to potential conflict of interest) from rating the stock.
Stock Ratings
Sector Weightings (note: Broader market averages refer to S&P 500 in the U.S. and S&P/TSX Composite in Canada.)
O
Overweight
Sector is expected to outperform the broader market averages.
M
Market Weight
Sector is expected to equal the performance of the broader market averages.
U
Underweight
Sector is expected to underperform the broader market averages.
NA
None
Sector rating is not applicable.
"Speculative" indicates that an investment in this security involves a high amount of risk due to volatility and/or liquidity issues.
Ratings Distribution*: CIBC World Markets Inc. Coverage Universe
(as of 17 Dec 2014)
Count
Percent
Sector Outperformer (Buy)
158
42.0%
Sector Performer (Hold/Neutral)
172
45.7%
37
9.8%
Sector Underperformer (Sell)
8
2.1%
Restricted
Sector Underperformer (Sell)
Restricted
Inv. Banking Relationships
Count
Percent
Sector Outperformer (Buy)
152
96.2%
Sector Performer (Hold/Neutral)
168
97.7%
30
81.1%
8
100.0%
Ratings Distribution: Oil & Gas - Dividend Corporations Coverage Universe
(as of 17 Dec 2014)
Count
Percent
Count
Percent
Sector Outperformer (Buy)
10
43.5%
Inv. Banking Relationships
Sector Outperformer (Buy)
10
100.0%
Sector Performer (Hold/Neutral)
Sector Performer (Hold/Neutral)
10
43.5%
10
100.0%
Sector Underperformer (Sell)
2
8.7%
Sector Underperformer (Sell)
2
100.0%
Restricted
1
4.3%
Restricted
1
100.0%
Oil & Gas - Dividend Corporations Sector includes the following tickers: ARX, BNE, BNP, BTE, CJ, CPG, ERF, FRU, JOY, LRE, LTS, NBZ,
PEY, PGF, PSK, PWT, SGL, SGY, TBE, TET, TOG, VET, WCP.
*Although the investment recommendations within the three-tiered, relative stock rating system utilized by CIBC World Markets Inc.
do not correlate to buy, hold and sell recommendations, for the purposes of complying with NYSE and NASD rules, CIBC World
Markets Inc. has assigned buy ratings to securities rated Sector Outperformer, hold ratings to securities rated Sector Pe rformer, and
sell ratings to securities rated Sector Underperformer without taking into consideration the analyst's sector weighting.
Important disclosures required by IIROC Rule 3400, can be obtained by visiting CIBC World Markets Inc. on the web at
http://researchcentral.cibcwm.com. Important disclosures for each issuer can be found using the "Coverage" tab on the
top left of the Research Central home page. Access to the system for rating investment opportunities and our
dissemination policy, can be found under 'Quick Links' on bottom right side of the Research Central homepage. These
important disclosures can also be obtained by writing to CIBC World Markets Inc., Brookfield Place, 161 Bay Street, 4 th
Floor, Toronto, Ontario M5J 2S8, Attention: Research Disclosures Request
8
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
CIBC World Markets Inc. Price Chart
HISTORICAL PERFORMANCE OF CIBC WORLD MARKETS INC. RECOMMENDATIONS FOR PENN WEST
PETROLEUM LTD. (PWT)
Date
01/16/2012
02/17/2012
04/04/2012
05/07/2012
07/16/2012
08/13/2012
11/04/2012
11/07/2012
11/27/2012
12/04/2012
01/15/2013
07/23/2013
11/06/2013
11/07/2013
11/08/2013
07/16/2014
09/19/2014
10/09/2014
10/23/2014
12/02/2014
12/03/2014
Change Type
Closing Price
21.45
21.44
18.35
15.06
13.27
14.14
12.11
10.65
10.66
10.74
10.30
13.19
9.74
8.91
9.09
9.70
8.01
6.06
5.50
3.77
3.81
Rating
SO
SO
SO
SO
SO
SO
SO
R
SO
SO
SP
SP
R
SP
SP
SP
SP
SP
R
SP
SP
Price Target
30.00
31.00
29.00
27.00
19.00
18.50
17.50
17.50
16.00
11.00
13.00
13.00
12.00
12.50
11.00
10.00
10.00
8.25
Coverage
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
Jeremy Kaliel
9
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Legal Disclaimer
This report is issued and approved for distribution by (a) in Canada, CIBC World Markets Inc., a member of the
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which is regulated by the Financial Services Authority (“FSA”), (c) in Australia to wholesale clients only, CIBC Australia
Ltd, a company regulated by the ASIC with AFSL license number 240603 and ACN 000 067 256, and (d) in Japan, CIBC
World Markets (Japan) Inc., a registered Type 1 Financial product provider with the registration number Director General
of Kanto Finance Bureau #218 (collectively, “CIBC World Markets”) and (e) in the United States either by (i) CIBC World
Markets Inc. for distribution only to U.S. Major Institutional Investors (“MII”) (as such term is defined in SEC Rule 15a -6)
or (ii) CIBC World Markets Corp., a member of the Financial Industry Regulatory Authority (“FINRA”). U.S. MIIs receiving
this report from CIBC World Markets Inc. (the Canadian broker-dealer) are required to effect transactions (other than
negotiating their terms) in securities discussed in the report through CIBC World Markets Corp. (the U.S. broker-dealer).
This report is provided, for informational purposes only, to institutional investor and retail clients of CIBC World
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jurisdiction where such offer or solicitation would be prohibited. This document and any of the products and information
contained herein are not intended for the use of private investors in the United Kingdom. Such investors will not be a ble
to enter into agreements or purchase products mentioned herein from CIBC World Markets plc. The comments and views
expressed in this document are meant for the general interests of wholesale clients of CIBC Australia Ltd.
This report has been prepared by the CIBC group and is issued in Hong Kong by Canadian Imperial Bank of
Commerce, Hong Kong Branch, a registered institution under the Securities and Futures Ordinance, Cap 571 (the “SFO”).
This report is intended for “professional investors” only (within the meaning of the SFO) and has been prepared for
general circulation and does not take into account the objectives, financial situation or needs of any recipient. Any
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this report should contact Canadian Imperial Bank of Commerce, Hong Kong Branch at Suite 3602, Cheung Kong Centre,
2 Queen’s Road Central, Hong Kong (telephone number: +852 2841 6111). Orders for Hong Kong listed se curities will be
executed by Canadian Imperial Bank of Commerce, Hong Kong Branch. Canadian Imperial Bank of Commerce, Hong
Kong Branch has entered into an arrangement with its broker-dealer affiliates worldwide to execute orders for securities
listed outside of Hong Kong for Hong Kong clients.
This report is intended for distribution in Singapore solely to “institutional investors” (within the meanings of the
Financial Advisers Act (Chapter 110 of Singapore)).
The securities mentioned in this report may not be suitable for all types of investors. This report does not take into
account the investment objectives, financial situation or specific needs of any particular client of CIBC World Markets.
Recipients should consider this report as only a single factor in making an investment decision and should not rely solely
on investment recommendations contained herein, if any, as a substitution for the exercise of independent judgment of
the merits and risks of investments. The analyst writing the report is not a person or company with actual, implied or
apparent authority to act on behalf of any issuer mentioned in the report. Before making an investment decision with
respect to any security recommended in this report, the recipient should consider whether such recommendation is
appropriate given the recipient's particular investment needs, objectives and financial circumstances. CIBC World
Markets suggests that, prior to acting on any of the recommendations herein, Canadian retail clients of CIBC W orld
Markets contact one of our client advisers in your jurisdiction to discuss your particular circumstances. Non -client
recipients of this report who are not institutional investor clients of CIBC World Markets should consult with an
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explanation of its contents. CIBC World Markets will not treat non-client recipients as its clients solely by virtue of their
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Past performance is not a guarantee of future results, and no representation or warranty, express or implied, is
made regarding future performance of any security mentioned in this report. The price of the securities mentioned in this
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no liability for any loss arising from the use o f information contained in this report, except to the extent that liability may
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Information, opinions and statistical data contained in this report were obtained or derived from sources believed to
be reliable, but CIBC World Markets does not represent that any such information, opinion or statistical data is accurate
or complete (with the exception of information contained in the Important Disclosures section of this rep ort provided by
CIBC World Markets or individual research analysts), and they should not be relied upon as such. All estimates, opinions
and recommendations expressed herein constitute judgments as of the date of this report
10
2015 Capex Reduced 26%; Dividend Slashed By 79% - December 17, 2014
Legal Disclaimer (Continued)
and are subject to change without notice.
Nothing in this report constitutes legal, accounting or tax advice. Since the levels and bases of taxation can change,
any reference in this report to the impact of taxation should not be construed as offering tax advice on the tax
consequences of investments. As with any investment having potential tax implications, clients should consult with their
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This report may provide addresses of, or contain hyperlinks to, Internet web sites. CIBC World Markets has not
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© 2014 CIBC World Markets Inc. All rights reserved. Unauthorized use, distribution, duplication or disclosure
without the prior written permission of CIBC World Markets is prohibited by law and may result in prosecution.
11