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 (BestGrowthStock) – 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.

Stock Market News

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

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