May 6 (Bloomberg) -- Penn West Petroleum Ltd., the Canadian oil and natural gas producer with the highest dividend yield, rose after naming former Suncor Energy Inc. head Rick George as its chairman.
Penn West climbed 5 percent to C$9.99 at the close in Toronto, the biggest gain since April 9. George, 62, ran Canada’s largest energy company until last year and his appointment at Penn West is effective immediately, the Calgary-based company said in a statement yesterday. It also named Allan Markin, Canadian Natural Resources Ltd.’s chairman until last year, vice chairman.
George’s appointment is giving Penn West “credibility with the markets,” Sam La Bell, a Toronto-based analyst at Veritas Investment Research Co., said in a phone interview today. Penn West has begun driving down drilling costs, which may prevent a dividend cut, and “they brought in somebody on the board level who’s known for running a tight ship.”
The appointments come after Penn West director Jack Schanck replaced eight-year chairman John Brussa on May 1. Penn West is the worst-performing stock this year among Canadian energy companies with a market value more than C$3 billion ($2.98 billion) after Cenovus Energy Inc., according to figures compiled by Bloomberg.
High costs at Penn West were boosting debt relative to cash flow and threatening the company’s dividend, La Bell said. Penn West’s dividend yield of 11.4 percent is the highest among the same group of Canadian energy companies. The stock has six buy, 13 hold and four sell recommendations from analysts.
“The balance of the board will be announced in a circular mid-month,” Penn West Chief Executive Officer Murray Nunns said in a phone interview today, referring to a filing to be made before the company’s annual meeting on June 5. Nunns declined to comment on any changes the document will contain, including whether the company will revise its dividend.
Nunns plans to remain CEO of Penn West, he said.
The addition of George and Markin to the board is “very important” to investors, Nunns said, as well as a confirmation of the company’s “inherent value, and the importance of picking what the strategy will be, on a go-forward basis.”
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