Case Study: Penn West

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Penn West is a pretty interesting company. Though it may be suffering through many problems, some investors are being recommended to invest in this company. I’d like to talk about this company and the difficult situation it’s in. At the end I think you should decide whether investing in this company would be worth it.
Before we start anything I think it would only make sense if I gave some background information about this company. Penn West is an oil and natural gas production company in Canada. Currently they are located in Calgary and this is their only location. To be more specific they are located on 9th Avenue SW in Suite 200 in Penn West Plaza. There is no specific reason they have stated about why they are located in Calgary, but one
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Penn West is in a large amount of debt. They have to repay more than 2.2 billion dollars. The reason for this is mainly because of the decline in crude oil production and prices. Penn West wasn’t producing enough crude oil and the price of it was going down. They decided to take a loan to keep the company running. Unfortunately they haven’t been able to repay this loan and the amount of money needed to pay back turned very large. Shares of Penn West are down 90% over the last 52 weeks as the market becomes smaller for the company. In fact the New York Stock Exchange has informed the company it has six months to get the price of its (U.S listed) shares back above $1, or get delisted from North America’s largest stock exchange. Without a listing on the NYSE the company may not be able to make much money without investors and not be able to sell much in the U.S completely. Many investors are choosing not to invest in this company as it seems to be going on a death spiral. There is something important to think about. Penn West’s problems will probably affect Canadian oil production somehow. Refining and marketing oil is done by less than 20 Canadian oil companies. Though there may be numerous oil companies operating in Canada not all of them refine and market oil. When thinking of Penn West’s situation in this perspective you can see many pros and cons. Penn…show more content…
1 way they can solve their problem is by selling their company and starting in a different field of work. They would already have experience and would not make the mistakes they made in their previous company. For example taking too many loans and ending up in a debt. They would get a new image as this is a new company. Lastly since the company would be working in a different field, investors might invest in them and their stock price would go up. Unfortunately there are some cons to this solution. Since they are in a big debt it would be hard for them to sell the company and they would have to go through a big process. Not many people would want to buy this company as many investors think Penn West is a bad investment, so their company might be sold for very less and even after giving up everything they may not make much money. Lastly, investors might not invest in their company due to the company image they had previously. Another solution for this company could be to repay their debt by selling parts of their company. Once their debt is payed their stock price would go up and they would still be on the New York Stock Exchange. Investors would start to invest in their company more as they see the company isn’t dealing with any serious issues. Penn Wets would then be able to fully accomplish their goal. Again there are some cons to this solution. Selling parts of their company might affect how much

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