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Penn West Petroleum Ltd. announced Thursday that it has entered into a definitive agreement for the sale of its non-operated 9.5% working interest in the Weyburn Unit in Southeast Saskatchewan for cash consideration of $205 million, subject to closing adjustments.  They intend to use the proceeds from this disposition to reduce their senior debt.  Upon the completion of the sale of the Weyburn Unit working interest, they will have raised approximately $810 million in total proceeds this year through their non-core asset disposition program.

 

David Dyck, Senior Vice President and Chief Financial Officer of Penn West, commented, "This disposition further demonstrates the continued success of our non-core asset disposition program.  With this transaction, we have surpassed our $650 million non-core asset disposition target.  We believe that our dispositions this year evidence the quality of our non-core asset base, our ongoing commitment to reduce our debt, and our ability to successfully execute meaningful transactions in a challenging commodity price environment.  We will continue to pursue additional non-core asset divestitures in order to further reduce our leverage and we will continue to focus on our core operations."

The following are some of the key metrics and implied transaction multiples for the Weyburn Unit working interest for first half 2015:

Production

2,500 bbl/d

Liquids Weighting

100%

   

Operating Cost

$11.50/bbl

Normalized Operating Cost(1)

$25.50/bbl

Normalized Field Netback(1)

$17.50/bbl

   

Implied Production Multiple

$82,000/bbl/d

Implied Normalized Net Operating Income Multiple

13x

(1) Normalized Operating Cost and Field Netback reflect impact of capitalized CO2injection costs.

The effective date of the sale of the Weyburn Unit working interest will be July 1, 2015 and closing is expected to occur during the fourth quarter, subject to the receipt of all necessary regulatory approvals and the satisfaction of closing conditions customary in transactions of this nature.  RBC Capital Markets acted as their exclusive financial advisor on this disposition. 

Updated 2015 Production Guidance

As a result of the divestiture of both the Weyburn Unit working interest and Mitsue properties, previously announced on September 15, Penn West has updated their annual production guidance range to 84,000 – 88,000 boe/d from 86,000 – 90,000 boe/d.  Their capital budget for the year remains unchanged at $500 million.  They continue to expect their operating costs for the year to be between $19.25/boe and$19.75/boe with their G&A for the year to be between $2.80/boe and $3.05/boe.

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