Penn West Petroleum Ltd. will sell its properties in the Slave Point area of northern Alberta for CA$148 million in cash through a definitive agreement, the company said March 21.
The sale of the properties at Slave Point will 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 for the remainder of 2016 are about 35% and operating costs will likely increase to about CA$24 per barrel of oil equivalent.
The sale’s effective date is Jan. 1, and closing is expected to occur during the second quarter of 2016, subject to regulatory approvals and closing conditions, Penn West said. RBC Capital Markets was its exclusive financial adviser.
David Dyck, senior vice president and CFO, said that the Slave Point properties offer upside and have long been a core asset for Penn West. There is no development activity planned for the balance of this year, however, he said. He said that the Viking extension and the recent performance at Cardium are providing the most attractive rates of return in the company’s portfolio.
Penn West said that so far during 2016, it has closed or entered into definitive agreements or letters of intent to sell some of its noncore assets for aggregate cash consideration of about CA$80 million which, together with the proceeds from the Slave Point sale, brings the total expected cash from asset dispositions this year to about CA$230 million.
These noncore asset sales are expected to close by the end of the second quarter. Penn West's asset disposition program has now raised more than CA$1 billion in cash proceeds since the beginning of 2015.
Penn West Petroleum Ltd. is based in Calgary, Alberta.
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