CALGARY, Alberta, June 23 (Reuters) - Tough new rules from Alberta’s energy regulator that determine which companies are deemed strong enough to buy assets are off the mark in terms of fairness and transparency, Penn West Petroleum Ltd’s chief executive said on Thursday.
Penn West has been selling assets to shore up its balance sheet, and the rules, Chief Executive Officer Dave Roberts says, will impact Penn West’s activities.
“They have probably focused too much on some bad actors and I am not a big fan of lowest common denominator solutions,” Roberts said, speaking to reporters after Penn West’s annual general meeting.
“Ultimately I think as they listen to their constituents, which are the 500 companies that are now frozen out of the asset transfer market, that they will come to a solution we can all live with.”
The Alberta Energy Regulator (AER) announced an interim rule on Monday that companies seeking to buy oil and gas assets will need to show the deemed value of their production will exceed the deemed cost of cleaning up their inactive wells by a ratio of 2.0 or more after the purchase. Previously the ratio was 1.0.
The AER, which was not immediately available for further comments on the rules, made the change in a bid to stop weak companies from buying wells they may not be able to afford to decommission.
Around 200 companies are affected by the stricter rules, in addition to the 362 that did not qualify for asset purchases under the prior test.
In June, Penn West announced it was selling its core Saskatchewan assets for C$975 million ($762.73 million) to Teine Energy. The company also plans to sell some of energy assets in Alberta for about C$140 million.
Penn West warned in May it could default on its debt by the end of the second quarter, as a result of the two-year oil price slump.
Roberts told shareholders the company was now in a strong position to grow production by 10 percent annually, even though output has been cut to 25,500 barrels of oil equivalent per day, down significantly from 133,000 boepd in 2013.
He added the relationship between Penn West and its lenders was likely to improve. One Calgary-based source with direct knowledge of that relationship, who was not authorized to speak publicly, said it had soured over Penn West’s previous reluctance to sell core assets.
“We have undergone a very difficult time and those relationships, even though some of them may be strained, we think will be improved over time,” Roberts said. ($1 = 1.2783 Canadian dollars) (Reporting by Nia Williams; Editing by Diane Craft)