CALGARY, ALBERTA–(Marketwired – July 11, 2017) – Pengrowth Energy Corporation (TSX:PGF)(NYSE:PGH) today announced that it has entered into an agreement with a private company owned by a large Canadian life insurance company for the sale of its Olds/Garrington area assets in Central Alberta for cash consideration of $300 million, before customary closing adjustments.
The Olds/Garrington area assets are expected to generate 2017 average daily production of 13,875 barrels of oil equivalent per day (boe per day), and had Proved plus Probable (2P) reserves of 78 million boe as at December 31, 2016, as per the GLJ Petroleum Consultants independent reserve valuation dated December 31, 2016. The assets include facilities and gathering systems related to the oil and gas properties being sold, as well as the Olds Gas plant.
The effective date of the transaction is May 1, 2017 and closing is expected to occur on August 1 2017, subject to the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions. Following the closing of the sale, the Company will continue to improve its net debt profile with no debt maturities until 2018.
Since the start of 2017, Pengrowth has closed or expects to close $827 million of asset sales, which when combined with the $287 million of cash on hand at year end 2016, represents a net debt reduction of over $1.1 billion or approximately 66 percent of December 31, 2016 debt. This was accomplished while only reducing the Company’s 2P reserves as of December 31, 2016 by approximately 16 percent. Following the closing of the sale, the Company’s core focus areas will be its flagship 100 percent owned Lindbergh thermal project and its 90 percent owned Groundbirch Montney play. These two key assets, with their associated $9.0 billion of low risk, high netback development opportunities represent the bulk of the remaining 84 percent of the Company’s 2P reserves as at December 31, 2016 and are expected to position the Company for long-term growth in reserves, production and cash flow.
Derek Evans, President and CEO of Pengrowth commented, “We are delighted by the significant progress that we have made on reducing our debt and strengthening our balance sheet. Our efforts and results to date have been transformational for Pengrowth, allowing us to retain our best assets with the most development opportunities and putting us on a path to either renegotiate or refinance our remaining term debt to allow us the flexibility to develop our Lindbergh and Groundbirch assets.”
Swan Hills Update
On July 5, 2017, Pengrowth announced the closing of the sale of one of its two previously announced Swan Hills sales packages for $185 million. At that time it also announced that it was continuing to work to close the second Swan Hills sales package with a separate purchaser. The purchaser of the second Swan Hills sales package has now indicated that it is unable to complete its financing for the acquisition and, as such, Pengrowth has given notice of termination of the sale agreement announced on March 20, 2017 and has requested that the $18 million deposit, currently being held in escrow be released to Pengrowth. Pengrowth will recommence its efforts to sell these assets.
In light of the Company’s announcements regarding the sale of its Olds/Garrington area assets and the termination of one of the Swan Hills sales described above, the Company is updating its 2017 guidance as follows:
|Previous Guidance||New Guidance|
|Average daily production (boe per day)||43,500 to 45,500||41,500 to 43,500|
|Total capital expenditures ($ millions)||125||125|
|Royalties1 (% of sales)||9.0||9.0|
|Operating costs2 ($ per boe)||13.00 to 13.50||13.00 to 13.50|
|Cash G & A2 ($ per boe)||3.50 to 4.00||3.50 to 4.00|
|1. Royalties are before impacts of commodity risk management activities|
|2. Per boe estimates based on high and low ends of production guidance|
Second Quarter Results
Pengrowth intends to release its second quarter results for the period ending June 30, 2017 on Monday, August 14, 2017, following the close of equity markets.
Pengrowth Energy Corporation is a Canadian intermediate energy company focused on the sustainable development and production of oil and natural gas in Western Canada from its Lindbergh thermal oil property and its Groundbirch Montney gas property. 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”.