The past year has been tremendously painful for investors of Penn West Petroleum Ltd.  (TSX:PWT)(NYSE:PWE). It has gone from a 52-week high of $8.63 all the way down to less than $1 a share today. If you had invested $10,000 at the high, your holdings would be less than $1,000, dividends not taken into consideration.

The thing is, this stock has been on a downward trend for years. The problems started back in 2008 when the company was under different management. Management went on an acquisition spree, buying up assets left and right that it probably didn’t need. One of them in particular was Canetic Resources Trust, which left Penn West with a significant amount of debt.

Fortunately, new management has taken over and they are doing whatever they can to try to right the ship. Dale Roberts, the current CEO of Penn West, made a deal with lenders that would give the company even more time to pay off its debt. All the lenders required was that the company sell off $650 million worth of assets by 2017. The company was able to cut $321 million from that when it sold large pieces of land to Freehold Royalties Ltd.

But the problem is this…

It still has debt to the tune of over $2 billion. That’s over four times its market cap, which is definitely not where a company wants to be when it is looking to grow. So, while it has been able to push back repayment of the loans, it still has a ton of debt that it needs to get under control. And I’m concerned that won’t happen.

Could Penn West survive?

It all comes down to one thing: oil prices. If oil prices were to recover tremendously, the stock would shoot up. And the company is making other cuts so that it can attempt to survive through these depressed oil prices. But I don’t see oil prices returning to their former glory for some time.

With a potential Iran nuclear deal and a lot of oil leaving that country, plus the nonstop game of chicken between OPEC and oil sands producers, there is going to be a significant amount of oil hitting the market over the coming months. And with the Chinese economy slowing down, I expect demand for oil will follow, resulting in a serious mismatch of supply/demand. When that happens, prices drop even further.

So, the question is, should you buy?

If you are holding shares of the stock, I would continue to hold them. You could sell and use it to offset other earnings you may have from a tax perspective, but at this point, the damage is done. Instead, hold them as a high-risk, high-reward sort of move. If oil prices recover, Penn West will rise and you may get something out of it.

According to the company, its reserves are worth over $5 billion. If you subtract the debt it holds, the stock could be worth upwards of $6 or $7 a share. So, if you were to hold on to your shares, you might see a return to somewhere around the 52-week high.

But if you’re considering getting in for the first time, do some serious research and determine if you can risk that money. This is not a safe investment. It is all about risk. There is a very good chance that you could wind up losing a considerable amount of money, if not all of it.

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Fool contributor Jacob Donnelly has no position in any stocks mentioned.