May 5, 2010 / 11:35 AM / in 8 years

UPDATE 3-Penn West posts Q1 profit; funds flow disappoints

* Q1 profit C$0.18/unit vs est loss C$0.01/unit

* Total production down 9 pct

* Says no changes to prior forecast

* Units fall 14 pct (Recasts; adds details, analyst comments, updates share movement)

By Bhaswati Mukhopadhyay

BANGALORE, May 5 (Reuters) - Penn West Energy Trust PWT_u.TO posted a surprise quarterly profit, helped by higher crude oil prices, but reported cash flow that came in below market expectations.

Penn West stock fell as much as 14 percent to a low of C$17.09. It later recouped some losses and was down 57 Canadian cents at C$19.25 in afternoon trade on the Toronto Stock Exchange.

Analysts said the stock was down in tandem with its peers such as Arc Energy Trust AET_u.TO and Baytex Energy Trust BTE_u.TO, and the broader market, amid news of oil falling to a month-low of below $80 a barrel. [ID:nSGE64406S]

Penn West is an oil-weighted company and crude oil makes up almost 60 percent of its production.

The company’s first-quarter funds flow, the cash it uses to pay out distributions to investors, fell 1 percent to C$344 million, or 81 Canadian cents per unit, due to the impact of property transactions.

Analyst Menal Patel of National Bank Financial, who expressed concerns about the company’s production levels, said the consensus for funds flow was 88 Canadian cents per unit.

Canada’s largest conventional oil trust -- which has a suite of large-scale light-oil plays such as the Cardium, Dodsland and Waskada -- reported a 9 percent drop in total production to 164,587 barrels of oil equivalent (boe) per day.

“They are spending on lot of resource plays right now, so that could be an opportunity for this company in terms of stemming their production declines that they had in the past,” Patel said.

The company, however, reaffirmed its prior forecast.

For 2010, it still sees exploration and development capital expenditures of C$700 million ($683.6 million) to C$850 million.

“We anticipate spending the bulk of this budget in the second half of the year, as we accelerate our development into the third and fourth quarters,” Chief Operating Officer Murray Nunns said on a conference call.

The company expects 2010 average production of about 165,000 to 173,000 boe per day, with production additions weighted to later in the year.

Analysts are also looking at a distribution cut as the trust prepares to convert to an exploration and production company.

“Though it should not come as a huge surprise, any kind of distribution cut tends to catch some investors off guard,” Canaccord Adams’ Kyle Preston said.

SURPRISE Q1 PROFIT

For the first quarter, the company reported net income of C$77 million, or 18 Canadian cents per trust unit, compared with a net loss of C$98 million, or 25 Canadian cents per trust unit, in the year ago.

Gross revenue, which include realized gains and losses on commodity contracts, rose 3 percent to C$806 million.

Analysts on average were expecting the company to post a loss of 1 Canadian cent per unit, on revenue of C$803.9 million, according to Thomson Reuters I/B/E/S.

The company said crude oil prices averaged West Texas Intermediate (WTI), the U.S. benchmark, $78.79 per barrel in the first quarter of 2010, compared with WTI $43.21 per barrel in the first quarter of 2009.

Exploration and development capital expenditures were C$263 million, compared with C$181 million, in the year-ago period.

The company, which recently renewed its revolving bank facility for a three-year term to April 30, 2013, currently has about C$1.1 billion of unused credit capacity available.

$1=1.024 Canadian Dollar Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Ratul Ray Chaudhuri, Anne Pallivathuckal

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