CALGARY, ALBERTA–(Marketwired – April 25, 2017) – Pengrowth Energy Corporation (TSX:PGF)(NYSE:PGH) (the “Company” or “Pengrowth“) today announced that it has entered into an agreement for the sale of the remaining portion of its Swan Hills assets in North Central Alberta for total cash consideration of $185 million, subject to customary closing conditions and adjustments.
The divested assets generated average daily production of approximately 5,150 barrels of oil equivalent per day (boe per day) (weighted approximately 94 percent towards liquids) during the fourth quarter of 2016 and had Proved plus Probable reserves of 21.0 million boe assigned to them as at December 31, 2016, according to the independent reserve evaluators GLJ Petroleum Consultants Ltd.
This transaction essentially completes Pengrowth’s exit from the Swan Hills area and provides the company with additional financial flexibility to further reduce indebtedness. When combined with the $522 million of proceeds from the previously announced Lindbergh GORR, Swan Hills and Bernadet asset sales, the $185 million of proceeds from this sale of the remaining Swan Hills assets result in total disposition proceeds of $707 million to date in 2017.
The effective date of the sale is January 1, 2017 and closing is expected to occur on May 31, 2017, subject to the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions.
The Company expects to use the proceeds from this sale to further reduce its indebtedness, including prepaying the remaining outstanding US $100 million (equivalent Cdn $134 million) of the 6.35% senior term notes which are scheduled to mature on July 26, 2017. The prepayment is expected to be completed before the end of the second quarter following which the Company will have no further term debt due until August 2018.
Upon closing of all announced dispositions and application of proceeds to debt repayment, Pengrowth’s debt would fall to approximately Cdn $700 million, representing a decline in debt levels of approximately 60 percent since December 31, 2016.
The sale of the remaining Swan Hills assets is expected to impact full year 2017 average production guidance by approximately 3,400 boe per day, resulting in revised 2017 production to be between 43,500 and 45,500 boe per day. The remaining changes to 2017 guidance resulting from the sale are outlined in the table below:
|Previous Guidance||Date Guidance|
|Average daily production (boe per day)||47,000 to 49,000||43,500 to 45,500|
|Total capital expenditures ($ millions)||125||125|
|Funds flow from operations1($ millions)||170||160|
|Royalties2 (% of sales)||9.0||9.0|
|Operating costs3 ($ per boe)||13.00 to 13.50||13.00 to 13.50|
|Cash G & A3($ per boe)||3.50 to 4.00||3.50 to 4.00|
|1.||Based on a WTI crude oil price of US $55.00/bbl, an AECO natural gas price of Cdn $3.25/Mcf and a $0.74 USD/Cdn exchange rate|
|2.||Royalties are before impacts of commodity risk management activities|
|3.||Per boe estimates based on high and low ends of production guidance|
2017 Hedging Update
Prior to the recent strengthening in crude oil prices, Pengrowth elected to cancel its 2017 light oil risk management contracts it had in place and presently has no oil production hedged. The Company also entered into new natural gas risk management contracts to provide downside protection against potential declines in natural gas prices. As at March 31, 2017, the Company had the following risk management contracts in place for the remainder of 2017:
|Natural Gas||Q2, 2017||Q3 2017||Q4 2017|
|Fixed AECO price (Cdn$/Mcf)||$2.72||$2.72||$2.82|
First Quarter 2017 Conference Call
Pengrowth intends to release its first quarter results for the period ending March 31, 2017 on Tuesday, May 2, 2017, following the close of equity markets. A conference call and listen only audio webcast will be held, beginning at 6:30 A.M. Mountain Time (MT) on Wednesday, May 3, 2017, during which management will review Pengrowth’s results and respond to questions from the analyst community.
To ensure timely participation in the teleconference, callers are encouraged to dial in 10 minutes prior to the start of the call to register.
Toll free: (844) 358-9179 or International (478) 219-0186
Live listen only audio webcast: http://edge.media-server.com/m/p/6qtxx6m4
The call will be recorded and available for playback shortly after the conclusion of the meeting using the following dial-in numbers:
(855) 859-2056 or (800) 585-8367
Conference ID: 7764789
BMO Capital Markets Inc. acted as financial advisors to Pengrowth on the transaction.
Pengrowth Energy Corporation is a Canadian intermediate energy company focused on the sustainable development and production of oil and natural gas in Western Canada. The Company is headquartered in Calgary, Alberta, Canada and has been operating in the Western basin for over 28 years. The Company’s shares trade on both the Toronto Stock Exchange under the symbol “PGF” and on the New York Stock Exchange under the symbol “PGH”.