Cash-strapped Penn West Petroleum Ltd. has found a buyer for assets it does not consider central to its operations.
Penn West on Tuesday said it struck a deal to sell $175-million worth of property in central and southwestern Alberta, including “non-core” areas in the Viking and Mannville zones in the eastern part of central Alberta.
The company said the cash will help clean up its balance sheet. The deal, which comes when the market for asset sales has been soft, will allow Penn West to concentrate on its light oil plays. Healthy prices for light oil and other so-called liquids have prompted slews of companies to shed assets in order to create simpler, more focused, organizations.
The Penn West sale falls within this strategy. The assets were producing about 6,700 barrels of oil per day and 58 per cent of that was natural gas, the company said in a statement. It did not disclose who bought the assets.
Penn West said it will “continue to aggressively” focus on selling assets outside its long-term strategy. It adjusted its production guidance in light of the most recent sale and now expects to produce between 101,000 and 106,000 barrels of oil equivalent per day in 2014.
The company also provided an update on the fourth quarter of 2013, saying it was able to reduce annual expenses by 9 per cent. Penn West focused on conventional light oil in its Cardium and Viking plays. It was able to lower 2013’s capital expenses to $816-million from its budget of $900-million. Production in the fourth quarter also dropped, thanks to the company abandoning some wells. It “chose not to restore” more than 3,200 barrels of oil equivalent per day of “interrupted production based on economic recovery analysis in 2013.” This decision chopped an average of 1,400 barrels of oil per day from its full 2013 production, Penn West said.
The oil and gas company predicts its 2013 production will ring in at an average of 135,100 barrels of oil equivalent per day.
Penn West said it expects to spend $230-million in the first quarter of 2014.