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Energy Summary for Dec. 17, 2014

2014-12-17 19:19 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for January delivery added 54 cents to $56.47 on the New York Merc, while Brent for February added $1.17 to $61.18 (all figures in this para U.S.). Western Canadian Select traded at a discount of $16 to WTI ($40.47), unchanged. Natural gas for January added 8.3 cents to $3.70. The TSX energy index added 14.67 points to close at 216.04.

Today brought a fresh wave of budget and dividend cuts. Penn West Petroleum Ltd. (PWT), up 19 cents to $2.54 on 18.9 million, did both: It has lowered its quarterly payout all the way to three cents from 14 cents and has reduced its 2015 budget to $625-million from $840-million. Investors expected both moves, even though executives of Penn West were promising just two weeks ago that the dividend would stay intact. They have prudently changed their minds. The new yield of 4.7 per cent is much more manageable, and the new budget, trimmed by 25 per cent, caused just a 5-per-cent drop in 2015 production guidance. This is because much of the money that is being taken out of the budget would have gone to non-development and long-cycle-time projects. (As well, it looks like farmees are paying for a good chunk of the drilling. Yesterday, Raging River Exploration Inc. (RRX: $7.29) mentioned a new farm-in deal in the Saskatchewan Viking; Peters & Co. says the unidentified farmor is Penn West.) Investors and analysts were pleased. AltaCorp analyst Jeremy McCrea, who kept his price target at $4.50, said that risk-tolerant investors may find "some of the highest torque with Penn West."

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