CALGARY, Alberta – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce the divestiture of its non-core Charlie Lake and Cretaceous Unit assets (the “Wembley Assets”) in the Wembley area, as well as selected water infrastructure assets (the “Infrastructure Assets”) in the Wembley/Pipestone area, for total proceeds of $94 million prior to adjustments. There is no change to NuVista’s ownership in our core Montney assets in Pipestone, Wapiti, and the surrounding area, and no material change to our ownership in the Wembley gas plant.
NuVista has entered into a definitive Purchase and Sale Agreement with a Canadian operator for the sale of the Wembley Assets with an effective date of January 1, 2021. Subject to customary provisions, the transaction is expected to close on or near March 31, 2021. The primary value in the Wembley Assets is the 78,000 acre undeveloped Charlie Lake oil opportunity, and the total associated amount of 2021 annual production divested is approximately 1,100 Boe/d. The sale of the Infrastructure Assets has previously closed. There is no material cash flow associated with the Wembley or the Infrastructure assets.
Upon closing, the entire $94 million in proceeds will be applied to reduce borrowings on NuVista’s senior secured revolving credit facility. NuVista’s banking syndicate has reaffirmed the credit facility at $440 million. Prior to the dispositions, NuVista had met its net debt reduction target of $50 – $60 million in the second half of 2020 with proceeds from free cash flow, achieving $58 million of net debt reduction. Pro forma the dispositions, NuVista’s bank drawings as at January 1, 2021 were approximately $269 million, significantly expanding the liquidity available within the credit facility.
NuVista is also pleased to note that both condensate and natural gas future strip prices have increased materially in the past quarter, which is expected to result in a significant increase to 2021 projected cash flow at the same time as significant progress has already been made reducing our net debt. Our continuing focus is upon balancing ongoing debt reduction, increasing cash flow, and creating a comfortable cushion above midstream minimum volume commitments. This results in a dramatic pace of reduction in net debt to cash flow ratio. Capital spending will continue to be weighted heavily towards Pipestone, as our highest return area. NuVista retains the flexibility to revise capital spending from the second quarter onwards, should commodity prices increase or retreat significantly from the current positive trend.
Production for the fourth quarter of 2020 was 49,300 Boe/d, well above the production guidance range of 47,000 – 48,000 Boe/d. We are pleased to note that the capital program for the first quarter of 2021 is well underway and is on track to outperform cost and schedule expectations in bringing 22 powerful new Montney wells onstream from late in the first quarter through early in the second quarter. There are 12 wells in Pipestone North, 6 wells in Pipestone South, and 4 in the Bilbo area. Drilling and completions activities are nearing completion and costs are trending 10-15% below our 2020 average on a length/tonnage normalized basis. In addition, commissioning of the new Pipestone North Compressor Station, the Veresen Hythe Gas Plant expansion, and the associated pipeline are all progressing on schedule for commencement of operations in April.
NuVista will be releasing our fourth quarter and full year 2020 results after market close on March 2, 2021, along with our updated 2021 production and spending forecast and our summarized 2020 year end reserve information.
NuVista has top quality assets and a management team focused on relentless improvement. We have the necessary foundation and liquidity to add significant value as commodity prices continue to recover. We have set the table for returns-focused profitable growth to between 80,000 – 90,000 Boe/d with only half-cycle spending, since the required facilities infrastructure is now in place. We will continue to adjust to this environment in order to maximize the value of our asset base and ensure the long term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support. Please note that our updated corporate presentation will be available after our March 2, 2021 news release at www.nuvistaenergy.com.