Penn West: Uh, Wot's the Deal? Uh, dun worry bout it.

This report lays out some of the reasons I like and have bought this stock. It does not constitute personalized financial advice. Please do your own due diligence or hire a financial advisor (if you're so inclined) before making any investment decisions. DISCLOSURE: Author is long this stock.

The price of oil has moved up and stayed elevated due to the Iran situation and now the supply issues. Despite that, Penn West has stayed flat (at least until today). My instinctive reaction was to research what was going on at Penn West and the Canada situation and the second reaction was to research another oil investment that would track the price of oil more closely.

Yes, I was worried. But then, I took a deep breath and reminded myself that we are in this for the long-term, which still looks great. So here's my take on it:

* Canroys plummeted thanks to new Canadian tax regulation proposals. This has already been priced into the market as it happened last Halloween.

* The trusts are now getting held down by new AMERICAN tax regulation proposals -- specifically, the move to tax foreign dividends as regular income.

As far as I can tell, that's what's held Penn West down while the other oil stocks took off. While it may be irritating in the short-term, I'm still in like Flynn for these reasons:

1) Their assets are prime prospects. Net asset value is still favorable and what else can I say but location, location, location!?

2) Like most government action, the "Halloween Massacre" of the Canroys had unintended effects: namely the pirahnas of private equity smell blood in the water. There is hand-wringing in Canada now that many of the energy assets held by these trusts are now takeover targets by (mostly) foreign investors. Here's a story. So the legislation may not go through as originally proposed.

3) Trust in management. Bill Andrews and his crew have a proven track record and a great reputation. I'm betting that they'll do what's necessary to increase economic value. They know that Americans hold a large percentage of units. They have the pulse of the political situation up north. If remaining a trust no longer makes sense, Penn West is one of the best prospects to switch to a corporate structure. I still think this is a win/win situation. Either we get a fat dividend or we become a traditional corporation and if we're still this cheap, someone's going to take us out. In the meantime, oil supply keeps coming under pressure which puts the wind to our back.

I've already accumulated my target allocation for Penn West but I'd have no problem buying on dips if that wasn't the case.

DISCLOSURE: Author is long this stock

The Enlightened American

Penn West: Uh, Wot's the Deal? Uh, dun worry bout it.