Penn West Petroleum Rebrands to Obsidian Energy

Located in Calgary, Alberta, Obsidian Energy is a mid-sized Canadian natural gas and oil extractor. It once traded among the 60 largest companies on the Toronto Stock Exchange. Previously known as Penn West Exploration, Obsidian reached a peak market capitalization of approximately $9.5 million in January 2008. In fact, it was a Canadian royal trust from 2005 until 2011. In 2014, crude oil price fell significantly, affecting financial and operational activities of Obsidian Energy. As a result, it underwent restricting with most of its assets disposed of off to reduce debts.

 

The oil and naturals fields of Obsidian Energy are located along the Western Canadian Sedimentary Basin. It is one of the largest oil reserves in the world. Oil production comes from three key areas, which include the Alberta King, the Peace River oil sands, and the Pembina Cardium. Obsidian Energy expects to produce approximately 31,000 bbl per day in 2017. In 2008, Obsidian Energy paid a high dividend that yielded a rate of between 15% and 16% per year. Obsidian’s dividends are not subject to regular dividend rate because the Trust’s assets are considered a depletable resource. Instead, Obsidian dividends are taxed as return on capital rather than return on investment. That is an additional tax advantage that applies to all royalty trusts in the United States. Penn West was in a group of gas and oil producers that comprised of Enterra, Peyto Energy, Trilogy, Canadian Oil Sands, and Daylight Resources. The group could not pay income tax to the federal government after distributing its income to the shareholders.

 

Obsidian Energy began decreasing its workforce in June 2013. It downsized its employees from 2,350 to fewer than 1,000. The move came in response to the recent decline in oil prices. Obsidian Energy announced that it would lay off about 400 full-time employees and contractors on September 2, 2015. Its headquarters in Calgary, Penn West, which represents 35 percent of the total workforce will be affected significantly. Obsidian Energy also announced that it would suspend its dividend payments after its next payment in October. Its board of directors will also experience reduction of compensation.

 

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