UPDATE 2-Penn West says low oil prices no threat to dividend

Wed Nov 5, 2014 12:30pm EST
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(Updates with detail and comment on dividend payout in first seven paragraphs; updates shares.)

By Scott Haggett and Darshana Sankararaman

CALGARY, Alberta Nov 5 (Reuters) - Penn West Petroleum Ltd , one of Canada's largest conventional oil producers, said on Wednesday it can pay its dividend and fund its capital program even as falling oil prices cut into profits.

The company, which on Wednesday reported a surprise quarterly loss compared with a year-earlier profit, moved to reassure investors that the 14 Canadian cent per share quarterly payout is safe, even as its declining share price pushes its dividend yield above 10 percent.

"This has raised some concerns among some of our key stakeholders, including the analyst community and shareholders, about our ability to sustain our dividend," David Dyck, the company's chief financial officer, said on a conference call. "I can reiterate that the company remains confident in its ability to fund its capital expenditure programs and continue to pay a dividend."

Global crude prices have slipped by about 25 percent since touching a high of $115 in June, hurt by excess supply, including from North American shale fields, and weak demand from China and Europe. Natural gas prices have also been depressed due to a supply glut in North America.

Still, Dyck said Penn West's annual C$225 million ($197.7 million) outlay for dividends represents just a quarter of the company's expected cash flow in 2015, a sum the company sees as manageable.

The company said it expects a C$840 million capital budget in 2015, an amount it can adjust in the second half of the year should oil prices weaken further.

Penn West shares were up 5.8 percent to C$4.91 by midday on the Toronto Stock Exchange.   Continued...