Penn West warns it may default on debt; stock tumbles

Canada-based oil and gas producer Penn West Petroleum Ltd. warned it could be in violation of its lending agreements by the end of June 2016, leading to its shares losing a quarter of its value in Monday’s trade.

The company said that it had hired investment banking firm Rothschild of New York and accounting firm PWC of Calgary as advisers as it negotiated with its lending syndicate to ease conditions that could result in default if not met by 30 June 2016.

A default would allow the lenders to demand immediate repayment.

Penn West stock fell as low as $0.78 per share on Monday morning, down 26 per cent from its close of $1.05 on Friday. A year ago, Penn West stock was trading over $3 a share.

With debt of $1.87bn as of 31 March 2016, the company is required to maintain covenants on its senior debt and total debt to adjusted earnings. But depressed oil prices have led to a steep fall in earnings as compared to its debt.

Source:  The Star