CALGARY, March 21, 2016 /CNW/ – PENN WEST PETROLEUM LTD. (TSX – PWT; NYSE – PWE.BC) (“Penn West“, “we“, “us” or “our“) is pleased to announce that it has entered into a definitive agreement for the sale of its properties in the Slave Point area of Northern Albertafor cash consideration of $148 million, subject to closing adjustments customary in transactions of this nature.
Penn West is also pleased to announce that so far this year it has closed or entered into either definitive agreements or letters of intent to sell some of its non-core assets for aggregate cash consideration of approximately $80 million which, together with the proceeds from the sale of Slave Point, brings the total expected cash consideration from asset dispositions this year to approximately $230 million. These non-core asset sales are expected to close by the end of the second quarter. Penn West’s asset disposition program has now raised over $1 billion in cash proceeds since the beginning of 2015.
“Although Slave Point has long been one of our core assets, given the current outlook for commodity prices, we had no development activity planned for at least the balance of this year. The proceeds from the sale of Slave Point and some of our non-core assets will help to strengthen our balance sheet and improve our financial flexibility and our overall corporate metrics,” commented David Dyck, Senior Vice President and Chief Financial Officer of Penn West. “While we believe that Slave Point offers upside, the extension of our Viking play and recent Cardium performance provide us with ample development and growth opportunities and the most attractive rates of return in our portfolio. We are confident that our over 1,400 sections of land between those two plays will give us significant running room going forward.”
The sale of Slave Point is expected to 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 are approximately 35% and operating costs are estimated to increase to approximately $24.00per boe over the remainder of the year.