When I previously wrote about Penn Virginia (NYSE:PVA), WTI was trading in the $90's. I thought if the stock fell, it would be a good buying opportunity because Soros Fund and other significant holders would force management to sell to another company for a huge profit. With WTI now trading near $80 per barrel, it seems that opportunity is over, at least for the time being. Selling to an acquirer when WTI is around $80 per barrel doesn't make much sense. Penn Virginia would not be able to get top dollar for its assets. Management missed the window.
Investing in Penn Virginia now is basically asking if WTI can go back to the $90's again. If it does, Penn Virginia will most likely double or triple. If it doesn't, Penn Virginia does have some time left to wait it out. The company's Q3 earnings report shows this. Even though the company lost an adjusted $0.10 a share, Penn Virginia still had pro forma liquidity of $622 million at the end of the quarter. Penn Virginia also hedges in place, with derivatives hedging 11,992 barrels a day of crude at weighted price of $90.20 per barrel for 2015. That is roughly 70 percent of expected crude production for 2015 (depending on how lower WTI affects production). After 2015, Penn Virginia will have a harder time as most of its crude hedges…
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(November 3, 2014 - 1:15 AM EST)
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