Penn West Enters into Canadian Property Swap
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:
- Selling its interest in the medium gravity Lower Shaunavon development at Leitchville, Saskatchewan while increasing its dominant position in the emerging Dodsland Viking light oil play through the acquisition of a 50 percent interest in approximately 40,400 acres of undeveloped land. The acquired lands are directly adjacent to our current holdings of approximately 100,000 net acres over the Viking play and are amenable to horizontal multi-frac development. To date Penn West has drilled 38 horizontal wells into the play and our 2010 capital program calls for a ramp-up in drilling;
- Increasing its dominant position in the Cardium light oil play in West Central Alberta through the acquisition of a 100 percent interest in the Cynthia Cardium Unit (production of 560 barrels of oil equivalent per day and undeveloped lands of approximately 5,100 net acres) which directly folds into one of our core focus areas for horizontal multi-frac development in the Cardium. Penn West has a dominant land, production and infrastructure position in West Central Alberta including the emerging Cardium horizontal multi-frac plays at Pembina, Willesden Green, Leafland, Garrington and Sylvan Lake. Penn West has total holdings across the Cardium exceeding 550,000 net acres;
- Strengthening its balance sheet to a year-end pro forma debt to 12-month trailing EBITDA of approximately 1.9 times; and
- Furthering its dominant position in the tight oil resource plays within Western Canada.
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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