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by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery added $1.51 to $47.72 on the New York Merc, while Brent for July added $1.14 to $48.97 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.85 to WTI ($35.87), up from a discount of $12.30. Natural gas for June lost 6.7 cents to $2.029. The TSX energy index added 5.25 points to close at 184.52.

Penn West Petroleum Ltd. (PWT) plunged 23 cents to 82 cents on 14.6 million shares, after warning in its first quarter financials that it is on the brink of a potential debt default. The first quarter financials were actually better than analysts had predicted. Production of 77,010 barrels of oil equivalent a day was well above predictions of about 67,600 barrels a day -- Penn West cited "exceptional" wells in the Alberta Cardium and the Saskatchewan Viking -- while cash flow of nine cents a share was significantly better than predictions of negative one cent a share. As well, Penn West maintained its full-year production guidance at 60,000 to 64,000 barrels a day despite recent asset sales, and it lowered its operating cost guidance. All of this was undone by the debt troubles. Penn West had total senior debt of $1.86-billion as of March 31, and warned today that it might default on its lending agreements by the end of June if low commodity prices persist. This warning actually first arrived more than two months ago, when Penn West released its financials for year-end 2015. It said on March 10 that it thought it might breach its debt covenants by the end of the second quarter, and added that it would pursue asset sales, lender negotiations and other ways to mitigate this risk. Almost the exact same things were said today, but with a couple of important differences. For one thing, unlike the year-end financials, the financials today found "substantial doubt" regarding Penn West's ability to continue as a going concern. As well, Penn West has decided to bring in the big guns to help in the discussions with its lenders. Chief financial officer David Dyck said in a conference call this morning that the company has hired Rothschild and PricewaterhouseCoopers. The negotiations are crucial because the covenants that the lenders relaxed last year are due to tighten up after June 30. Penn West wants the lenders to keep them relaxed. It likely has a decent shot at success, given the recent strengthening in oil prices and the fact that the first quarter results, from an operational perspective, showed undeniable improvements. Still, investors are understandably anxious.

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