Penn West Petroleum has signed an agreement to sell all of its Saskatchewan assets to Teine Energy, backed by the Canada Pension Plan Investment Board (CPPIB) for $975m.
The sale of the assets, including the company’s Dodsland Viking area, is subject to normal closing adjustments.
The company has divided the Saskatchewan assets between medium and heavy oil properties in the West and the Dodsland light-oil properties in the East.
As part of the deal, Teine will acquire an estimated 16,300boe/d of production as of the first quarter of this year, as well as probable reserves of about 53.2MMboe and about 410,000 net acres of undeveloped land.
Penn West Petroleum senior vice-president and chief financial officer David Dyck said: "Saskatchewan is a coveted asset amongst many of our competitors, and with this transaction we have capitalised on the demand for high-quality oil assets of scale.
"While we have made significant progress over the past three years in reducing our total debt, this asset sale results in a markedly improved capital structure and positions the company in the top tier of our peers in terms of all significant debt metrics."
The transaction, along with additional Alberta asset dispositions for approximately $140m, is expected to close in the second quarter of this year.
Following its asset dispositions, the company received a total cash consideration of $1.3bn until this year and was able to reduce its pro forma net debt to approximately $600m from $2.1bn last year.
As a result of decreased interest expenses and reductions in general and administrative expenses through the deal, Penn West hopes to realise nearly $100m per year.
The transaction will be funded by CPPIB and Teine Energy’s existing credit facilities.
