Penn West Petroleum Ltd., the administrator of Penn West Energy Trust, has entered into an Asset Exchange Agreement to exchange certain interests in the Leitchville area of Saskatchewan for interests complimenting Penn West's light oil resource plays at Pembina and at Dodsland. In addition, Penn West will receive cash consideration of $434 million.
The net impact of this property swap will result in Penn West:
Over the past eighteen months Penn West has worked to improve its balance sheet while retaining the core assets that position it as the largest producer of light and medium gravity oil in Western Canada. Penn West moves aggressively into 2010 with an excellent portfolio of both exploration and development plays, a strengthened management and technical team and a strong balance sheet.
Penn West anticipates investing between $750 and $900 million into its expanding suite of exploration and development opportunities in 2010, with an emphasis on its emerging and large-scale light oil plays in Waskada, Dodsland, Willesden Green / Leafland / Garrington, Pembina, and Swan Hills. The use of horizontal multi-frac technology is rapidly evolving into the key to unlocking new reserves of oil and natural gas in the Western Canadian Sedimentary Basin both from new unconventional sources and from extending and improving production rates and recovery from large underdeveloped tight oil and gas reservoirs.
Penn West Energy, with approximately 7 million net acres of land in Western Canada, has a dominant land position in areas that are currently beginning to be exploited by horizontal multi-frac technology as well as extensive holdings over additional areas that we view as prospective for introducing horizontal multi-frac technology.
Penn West's average daily production, pro forma this transaction, is 168,000 barrels of oil equivalent per day. Penn West's production mix is 100,000 barrels per day of crude oil and NGLs, and 410 mmcf per day of natural gas (approximately 60 percent crude oil and NGLs). Production guidance for 2010, net of this transaction, is 167,000 to 175,000 barrels of oil equivalent per day.
The effective date of the Asset Exchange is October 1, 2009 with closing expected in early 2010, subject to conditions to closing under the Asset Exchange Agreement, including, but not limited to, obtaining all regulatory and other necessary approvals, and successful and satisfactory completion of due diligence reviews.
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