Penn West lines up buyers for C$1.3 billion of assets

Wed Oct 17, 2012 1:18pm EDT
 
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By Maneesha Tiwari and Jeffrey Jones

(Reuters) - Penn West Petroleum Ltd (PWT.TO: Quote) said on Wednesday it has lined up buyers for C$1.3 billion ($1.3 billion) worth of Canadian oil and gas assets, making good on plans to jettison non-core properties and use proceeds to cut debt.

Penn West, one of Canada's largest conventional oil and gas producers, also disclosed new reserve assessments for its emerging light oil and bitumen prospects, one of which it is developing in a joint venture with China Investment Corp CIC.UL. They suggest total resources exceed 1 billion barrels.

The Calgary-based company said the properties it is selling produce about 12,000 barrels equivalent a day, or roughly 7 percent of its total output.

The deals, in which buyers were not disclosed, are expected to close before the end of the year. Penn West's debt totaled C$3.7 billion at mid-year.

Chief Executive Murray Nunns said in August he planned to market the assets and cut capital spending by 10 percent as a way to reduce the debt and concentrate efforts on Penn West's most prospective properties amid volatile oil prices.

Penn West shares were up 20 Canadian cents, or 1.5 percent at C$13.86 on the Toronto Stock Exchange on Wednesday afternoon. They are down 31 percent since the start of 2012.

"I think it's good that they're pruning their portfolio and raising capital and realizing some value from some assets that maybe weren't large enough for a company their size to devote a lot of resources towards efficiently developing," Morningstar analyst Robert Bellinski said. "A transaction is probably the preferred method of realizing value there."

Penn West said reserves at its Peace River Oil Project properties, a bitumen play in which it has a 55 percent stake, has overall contingent resources of 473 million barrels net to its interest, according to an assessment by engineering firm AJM Deloitte.   Continued...