In 2014, energy prices did what almost nobody in the world expected. They fell dramatically, until crude oil was under $20 a barrel. Many financial analysts said this was negative for the economic, even though people driving cars celebrated the lower prices of gasoline at the pump. However, the were correct in that once a financial marker so important as the price of oil spends a long time in one place, the world adapts. When it changes, the world has to adapt again, often causing hardship. When the price of oil first increased dramatically in the 1970s, it created a lot of economic hardship and fueled inflation. Eventually, however, the world adapted to high oil prices.
When the price of oil fell so dramatically in 2014, oil company revenues decreased dramatically. This affected their employees and their communities. One of those affected was Penn West Petroleum. At one point, Penn West, located in Calgary, Alberta, was one of the 60 largest companies on the Toronto Stock Exchange. From 2005-2011 it was structured as a Canadian royalty trust company. In January 2008, just before the financial crisis, it reached its peak market capitalization of US$9.5 billion. In 2011, changes in Canadian business law forced it to become a corporation again. Read This Article to learn more.
When hit by the 2014 energy price collapse, Penn West spent two years restructuring and selling off assets to keep itself solvent and profitable in the new environment. They laid off many employees and independent contractors. They even suspended dividend payments to shareholders and lowered board salaries. In June 2017, Penn West shareholders approved a resolution to change the company’s name to Obsidian Energy. This symbolizes how the company has recognized it must innovate itself to stay competitive in the new environment of lower cost energy.
David French, the President and CEO committed Obsidian Energy to making decisions in a disciplined way to protect asset value. That is, to make sure they could deal with any future decreases in oil prices. Obsidian Energy owns oil and gas fields in the Western Canadian Sedimentary Basin, one of the world’s largest reserves, in the province of Alberta. They produce an average of 31,000 barrels per day.