CALGARY, March 21, 2016 /CNW/ – PENN WEST PETROLEUM LTD. (TSX – PWT; NYSE – PWE.BC) (“Penn West“, “we“, “us” or “our“) is pleased to announce that it has entered into a definitive agreement for the sale of its properties in the Slave Point area of Northern Alberta for cash consideration of $148 million, subject to closing adjustments customary in transactions of this nature.
Penn West is also pleased to announce that so far this year it has closed or entered into either definitive agreements or letters of intent to sell some of its non-core assets for aggregate cash consideration of approximately $80 million which, together with the proceeds from the sale of Slave Point, brings the total expected cash consideration from asset dispositions this year to approximately $230 million. These non-core asset sales are expected to close by the end of the second quarter. Penn West’s asset disposition program has now raised over $1 billion in cash proceeds since the beginning of 2015.
“Although Slave Point has long been one of our core assets, given the current outlook for commodity prices, we had no development activity planned for at least the balance of this year. The proceeds from the sale of Slave Point and some of our non-core assets will help to strengthen our balance sheet and improve our financial flexibility and our overall corporate metrics,” commented David Dyck, Senior Vice President and Chief Financial Officer of Penn West. “While we believe that Slave Point offers upside, the extension of our Viking play and recent Cardium performance provide us with ample development and growth opportunities and the most attractive rates of return in our portfolio. We are confident that our over 1,400 sections of land between those two plays will give us significant running room going forward.”
The sale of Slave Point is expected to lower Penn West’s corporate per barrel operating costs and reduce corporate decline rates. As a result of limited development capital allocated to Slave Point during 2015 and 2016, expected production declines for this area are approximately 35% and operating costs are estimated to increase to approximately $24.00 per boe over the remainder of the year.
The following are some of the key metrics and implied transaction multiples for the Slave Point properties based on our full year 2016 forecast:
Production (1) |
3,900 boe/d |
Liquids Weighting (1) |
97% |
Operating Cost (1) |
$20.00/boe |
Field Netback (1)(2) |
$15.00/boe |
Implied Production Multiple (1) |
$37,950/boe/d |
Implied Net Operating Income (NOI) Multiple (1)(2) |
7 times |
(1) |
Based on full year 2016 forecast |
(2) |
Assumes C$40/bbl Edmonton Par in Q1’16 and C$50/bbl Edmonton Par for the balance of 2016 |
The effective date of the sale of Slave Point is January 1, 2016 and closing is expected to occur during the second quarter of 2016, subject to the receipt of all necessary regulatory approvals and the satisfaction of closing conditions customary in transactions of this nature. RBC Capital Markets acted as our exclusive financial advisor on this disposition.
About Penn West
Penn West is one of the largest conventional oil and natural gas producers in Canada. Our goal is to be the company that redefines oil & gas excellence in western Canada. Based in Calgary, Alberta, Penn West operates a significant portfolio of opportunities with a dominant position in light oil in Canada on a land base encompassing approximately 4 million acres.
Penn West shares are listed on the Toronto Stock Exchange under the symbol “PWT” and on the New York Stock Exchange under the symbol “PWE.BC”.