CALGARY, Dec. 20, 2013 /CNW/ – PENN WEST PETROLEUM LTD. (TSX – PWT) (NYSE – PWE) (“Penn West”, “our” or the “Company”) is pleased to announce that it has successfully completed its previously announced asset divestitures.
On November 6, 2013, Penn West announced its intention to divest approximately $485 million of non-core assets producing approximately 12,500 boe per day as “phase one” of its divestment strategy related to the Company’s long-term plan. Today, the Company announces it has closed a series of transactions to dispose of non-core assets currently producing approximately 10,800 boe per day for total cash proceeds of approximately $486 million. The amount of production to be sold changed as the portfolio of properties transacted was altered slightly. On average, the divestitures were transacted at approximately 5.5 times estimated 2014 net operating income (“NOI”) and 1.1 times Penn West’s current internal estimate of the proved plus probable producing reserves value discounted at 10 percent. Divested production was weighted predominantly (81 percent) toward heavy oil and natural gas and the proceeds were used to repay outstanding advances on the company’s credit facilities.
Penn West’s previously announced 2014 average production guidance of 105,000 to 110,000 boe per day remains unchanged at this time notwithstanding the difference in the production disposed in “phase one”. Further dispositions are targeted for early 2014 and Penn West will update its 2014 production guidance as significant transactions close.
Dave Roberts, President and CEO commented: “The closing of these transactions further improves Penn West’s business by improving our balance sheet at attractive metrics while fully retaining our core asset positions. There was no development of these properties in our plans for the next five years, thus the assets are better managed by the counterparties, providing an economic benefit to both parties. I am pleased we were able to transact these properties at an attractive 2014 NOI multiple and at values above our internal estimates of proved plus probable producing reserves value. After accounting for our value of the legacy natural gas, we realized approximately $65,000 per flowing barrel on non-core oil and natural gas liquids production. With the completion of our “phase one” dispositions, we are focused on concentrating our asset base and the development of our core light-oil positions while at the same time driving toward our balance sheet targets.”
Divested assets were primarily situated in the mature Grande Prairie, Wainwright, and Southern Alberta areas and included approximately $3 million for non-producing lands.
Divested property attributes:
- Current production of approximately 10,800 boe per day
- Expected 2014 production weighted approximately 46 percent heavy oil, 35 percent natural gas, 16 percent light oil and 3 percent natural gas liquids
- Expected 2014 operating costs of approximately $23 per boe
- Estimated 2014 NOI of $89 million using Penn West’s 2014 budget pricing
- Includes approximately 1,620 net wellbores currently producing or suspended and the associated environmental liabilities
- No development capital allocated in the long-term plan
Average transaction metrics:
- Transacted at an estimated 2014 NOI multiple of 5.5 times
- Realized approximately $65,000 per flowing barrel on the oil and natural gas liquids production
- Approximately 1.1 times Penn West’s internal proved plus probable producing reserves value using evaluator prices at November 30, 2013
- Transacted at approximately $18 per boe on a proved plus probable producing reserve basis as at November 30, 2013
Penn West is one of the largest conventional oil and natural gas producers in Canada operating a significant portfolio of opportunities with a dominant position in conventional light oil in Canada. Based in Calgary, Alberta, Penn West operates throughout western Canada on a land base encompassing more than five million acres.
Certain statements contained in this document constitute forward-looking statements or information (collectively “forward-looking statements”) within the meaning of the “safe harbour” provisions of applicable securities legislation. Forward-looking statements are typically identified by words suggesting future events or future performance. In particular, this document contains forward-looking statements pertaining to, without limitation, the following: our estimated 2014 net operating income for the assets disposed of; our 2014 average daily production guidance; our target to close further dispositions in early 2014, some of which may be significant; the benefits that we anticipate will accrue to Penn West from the asset dispositions; and our intention to focus on concentrating our asset base and the development of our core light-oil positions while at the same time driving toward our balance sheet targets. With respect to forward-looking statements contained in this document, we have made assumptions regarding, among other things: future crude oil, natural gas liquids and natural gas prices and differentials between light, medium and heavy oil prices and Canadian, WTI and world oil prices, and in particular, our 2014 budget commodity pricing which is available in our Third Quarter Results & Long-Term Plan Corporate Presentation dated November 6, 2013, which is available on our website at www.pennwest.com and for purposes of internal estimates of the proved plus probable reserves and the net present value of the future net revenue from these reserves referred to herein (as further discussed under the heading “Oil and Gas Information Advisory” below), pricing assumptions reflected in an escalated forecast table dated November 30, 2013 based on information obtained from various sources, including government agencies, industry publications, Canadian oil refiners, and natural gas marketers, available up to and including the “as of” date in the table, which table can be found on the website of Sproule Associates Limited at www.sproule.com ; future capital expenditure levels; future crude oil, natural gas liquids and natural gas production levels; drilling results; future exchange rates and interest rates; our ability to obtain equipment in a timely manner to carry out development activities and the costs thereof; our ability to market our oil and natural gas successfully to current and new