Penn West names new CEO, sets dividend cut and layoffs

TORONTO, June 5 Wed Jun 5, 2013 10:00am EDT

TORONTO, June 5 (Reuters) - Canada's Penn West Petroleum Ltd named a former Marathon Oil Corp executive as CEO and said it would slash its dividend, cut 10 percent of its staff and review strategic options such as asset divestments and joint ventures.

The Calgary-based oil and gas producer, whose share price has fallen about 56 percent over the last two years, said late on Tuesday that it had appointed former Marathon Chief Operating Officer David Roberts as president and chief executive officer, effective June 19. He replaces Murray Nunns, who will retire from the company on July 1.

Penn West said it planned to focus on increasing efficiency, starting with a 10 percent workforce reduction over the next few weeks. The company had about 2,130 employees at the end of 2012.

For the third quarter, the company is cutting its quarterly payout to 14 Canadian cents a share from 27 Canadian cents to increase its financial flexibility, it said. Shares of Penn West were unchanged at C$10.90 in early trading in Toronto.

Penn West also said its board would form a special committee to explore such options as strategic financing alternatives, asset divestments, joint ventures and other business combinations.

The changes come barely a month after the company named two respected industry leaders to its board - former Suncor Energy Inc head Rick George as chairman and former Canadian Natural Resources head Allan Markin as vice chairman.

"We believe the announced CEO change signals a step forward in the ongoing reorganization and restructuring of Penn West," said BMO Capital Markets analyst Gordon Tait in a research note. "We are encouraged that the company appears to be making the difficult organizational and financial changes needed."

Tait and other analysts said, however, that Penn West was not out of the woods and still needed to improve operational efficiency, shed assets and strengthen its balance sheet.

"The company's base operations are unsustainable today," said Barclays analyst Grant Hofer. This makes Penn West a unattractive as a takeover target and joint venture partner, he said.

The company said its outlook on full-year production and capital spending remained unchanged.

"Penn West has many high-quality assets, but the company has yet to unlock their complete value," Chairman George said in a release.

The company will maintain the second-quarter dividend at 27 Canadian cents a share and pay it to shareholders of record on June 28.

Roberts, who has more than three decades of operational expertise in the oil and gas business, will join Penn West's board after he assumes the CEO position.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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