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Penn West sells non-core Alberta assets for $355mln, sells over $1bln in assets in one year

Published: 10:13 23 Oct 2014 EDT

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Shares of Penn West Petroleum (TSE:PWT) (NYSE:PWE) climbed in early deals Thursday after the company agreed to sell non-core assets in south central Alberta to an unnamed private company for $355 million.

The assets currently produce about 7,500 barrels of oil equivalent per day, according to the Calgary, Alberta-based company's statement, with the disposition representing less than 5 percent of its proved and probable reserve base as at December 31, 2013.

The sale, which is expected to close in early December subject to closing conditions, provides sale metrics of roughly $47,000 per flowing barrel, Penn West said.

The deal also reduces the company's well bore count by around 2,250 total wells, which is expected to be positive for its asset retirement obligations. Penn West said the assets were not allocated any current or future development capital under its long-term plan.

With the latest sale, the company will have completed over $1 billion in asset dispositions within the first year of its long-term plan. In November last year, Penn West announced a plan to reduce its debt through the sale of non core assets in the range of $1.5 to $2.0 billion.

"Further, as a result of these combined divestments, a favourable commodity price environment early in the year and strong operational improvements, we will have reduced our debt position by over $1.2 billion during that same period – a positive step forward in our improvement story," said president and chief executive officer, Dave Roberts.

"We are now directing our disposition efforts to non-producing assets as we continue to increase the focus on our core areas and improve our financial flexibility through a considerably stronger balance sheet."

Even with the impact of the latest sale, Penn West reiterated its 2014 production guidance of 101,000 to 106,000 barrels of oil equivalent per day, but said it now anticipates full year average volumes to be above the mid-point of this range. This reflects better-than-expected performance in the company's base production and strong results in new growth in each of its three core light oil areas.

Penn West is one of the largest conventional oil and natural gas producers in Canada. It has a dominant position in light oil in Canada, on a land base of approximately 5 million acres.

Shares of Penn West were up 4.5 at C$5.56 as of 9:57am ET in Toronto on Thursday.

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