CALGARY, Oct. 3, 2016 /CNW/ – PENN WEST PETROLEUM LTD. (TSX – PWT; NYSE – PWE) (“Penn West“, “we“, “us” or “our“) announces that it has offered $448 million of cash on hand to its senior noteholders to prepay amounts owing to them at par and on a pro rata basis. The total principal amount of the senior notes currently outstanding is approximately $576 million prior to the prepayment offer. We expect to complete the prepayment process prior to releasing our third quarter financial and operating results in early November.
The $448 million of cash is from previously announced asset sales completed this year, not including the sale of all of our Saskatchewan assets, with the most recent asset sales representing proceeds of approximately $75 million completed in the third quarter. The agreements with our senior noteholders allow us to use asset sale proceeds to make prepayment offers to them at par.
We expect our pro-forma Senior Debt at the end of the third quarter to be reduced to approximately $470 million from $2.0 billion at year-end 2015 and our Senior Debt to EBITDA to be 2.0 times relative to a 4.5 times covenant threshold which is within the top half of our peers. We also expect to remain in full compliance with all of our financial covenants going forward into 2017. In the event the prepayment offer is not fully accepted by our noteholders, we intend to use the unallocated cash to reduce the amount outstanding under our revolving bank credit facility.
“Our decision to apply the asset sale proceeds towards our notes reduces the effective interest rate on our debt and advances our goal of continuing to simplify Penn West’s debt capital structure”, David Dyck, Senior Vice President and Chief Financial Officer of Penn West commented. “We would like to thank all of our lenders for their patience and support as we have worked diligently to transform our company. Our successful asset divesture program has provided us with the balance sheet strength and financial flexibility to proceed with a balanced development plan in our core areas. Our refocused asset base is very competitive, with a top quartile cost base and a compelling organic growth profile.”
About Penn West
Penn West is a conventional oil and natural gas producer in Canada. Our goal is to be the company that redefines oil and gas excellence in western Canada. Based in Calgary, Penn West operates a significant portfolio of opportunities with a dominant oil position in the Cardium, Viking and Peace River areas of Alberta.