PENN WEST PETROLEUM LTD. (PWT.TO) (PWE) is pleased to announce that it has entered into definitive agreements with Freehold Royalties Ltd. (FRU.TO) relating to the sale by Penn West of an 8.5 percent gross overriding royalty in its working interests in a portion of the Viking play located in the Dodsland area of Saskatchewan and certain of its existing royalties and mineral title lands located in Alberta, Saskatchewan and Manitoba spanning through a variety of plays for an aggregate cash consideration of $321 million, before normal closing adjustments. Closing is expected to occur on or about May 6, 2015, subject to the receipt of regulatory approvals and the satisfaction of customary closing conditions. TD Securities Inc. acted as financial advisor to Penn West on the transaction.
The Company intends to use the proceeds from the sale of these royalties to reduce its senior debt in accordance with the terms of the previously announced agreements in principle with its lenders. The proceeds represent approximately 50 percent of Penn West’s commitment to offer aggregate net proceeds of up to $650 million received from asset dispositions to prepay at par any outstanding principal amounts owing to the holders of our senior, unsecured notes.
Dave Roberts, President and CEO, commented, “This transaction is a strong result for Penn West on all measures and I am pleased with our team’s ability to consistently generate creative solutions in challenging circumstances. This disposition marks a critical milestone in our ongoing strategic focus to reduce debt and strengthen our balance sheet without materially impacting EBITDA or production volumes. We will continue to strengthen Penn West’s long-term financial sustainability and the execution of our light oil focused strategy during this cyclical downturn in oil prices.”