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by Stockwatch Business Reporter

West Texas Intermediate crude for December delivery spiked midmorning to $79.35 on the New York Merc, following rumours of a pipeline explosion in Saudi Arabia (all figures in this para U.S.). It closed up $1.49 to $78.68. Brent for December added 13 cents to $82.95. Western Canadian Select traded at a discount of $16.90 to WTI ($61.78), unchanged. Natural gas for December added 6.5 cents to $4.19. The TSX energy index added 9.64 points to close at 253.42.

Penn West Petroleum Ltd. (PWT) added 10 cents to $4.74 on 4.31 million shares, rising despite posting an unexpected loss in the third quarter. Analysts had predicted earnings of eight cents a share. Instead, the company lost three cents a share, compared with earnings of seven cents a share in the same period last year. Lower production caused by asset sales, as well as lower prices for oil and natural gas liquids, contributed to the decline. The surprise loss was offset by reassurances about the company's dividend and spending plans. In a conference call this morning, chief financial officer David Dyck noted that the dividend yield recently crossed 10 per cent, raising concerns among analysts and investors. He emphasized that Penn West can still afford it. The current payout obligation of $225-million a year represents about one-quarter of forecast funds flow in 2015, which Mr. Dyck feels is manageable. President and chief executive officer Dave Roberts drove the point home further when, in response to an analyst question about cutting the dividend if commodity prices keep falling, he said, "No, the dividend is intact," and indicated that Penn West would rather lower its budget. (If that happens, it would not be until the second half of 2015.) Penn West will release more details about its 2015 plans on Nov. 17. Investors will be hoping for more information on asset sales and debt reduction. Since last November, when Penn West set a goal of selling $1.5-billion to $2-billion of assets before 2015, it has sold over $1.1-billion of assets and reduced debt by over $1.2-billion. Its Duvernay assets are thought to be next. If Penn West can sell its 151,000 net Duvernay acres for the $5,000 per acre it is seeking, it would accomplish its asset sale goal and further narrow its focus on the Viking, Cardium and Slave Point. The emerging Duvernay play has never been a priority for the company. It has drilled a couple of stratigraphic test wells, but did not drill anything last year and did not drill a horizontal well until July of this year. It plans to release results after the horizontal well comes on production in December. Good results should help it attract a bidder.

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