Alberta energy brief: Pengrowth sells $827 million of asset of assets to reduce debt

Pengrowth and Birchcliff Energy asset sales

Pengrowth re-focuses on 100%-owned core areas, Birchcliffe reduces debt in order to fund capex

Pengrowth closes significant asset sales

Pengrowth Energy Corp.’s Q2 2017 financial report highlights asset sales, as well as reductions to outstanding debt and cost structures, the company announced in a press release.

Since the start of 2017, Pengrowth closed $827 million of asset sales when combined with the $287 million of cash on hand at year end 2016, represents a pro forma debt reduction of over $1.1 billion or approximately 66 per cent of Dec. 31, 2016 debt.

With the closing of these sales, the company’s core focus areas are its flagship 100 per cent owned Lindbergh thermal project and its 90 per cent owned Groundbirch Montney play.

These two key assets, with their associated $9 billion of low risk, high netback development opportunities represent the bulk of the remaining 82 per cent of the company’s 2P reserves as at Dec. 31, 2016 expected to position the company for long-term growth in reserves, production and cash flow, the company says.

“The successful $827 million of closed asset sales in 2017 has been instrumental, not only in reducing our debt but also in reaching an agreement in principle on the key elements of an amendment to our covenants with our noteholders. These are the critical steps that were required to unlock the long-term growth potential and sustainable nature of our key assets,” said CEO Derek Evans.

Birchcliff Energy sales will improve balance sheet, reduce indebtedness

Birchcliff Energy Ltd. announced a series of asset sales and expects to complete additional asset sales, including the sale of its Worsley Charlie Lake Light Oil Pool, for total proceeds of $142 million, according to a press release.

These sales collectively represent forecast 2017 annual average production of approximately 3,600 boe/d (approximately 62 per cent light oil and NGLs) and proved plus probable reserves of 48.2 MMboe at Dec. 31, 2016.

“We believe that these asset sales will allow us to become more geographically focused and become even more competitive in our industry,” said Jeff Tonken, president of Birchcliff.

“In addition, the proceeds from these asset sales will allow us to reduce our indebtedness, which will improve our balance sheet and increase our financial flexibility.”

The proceeds are anticipated to be used to reduce Birchcliff’s indebtedness, which will be subsequently redrawn as needed to fund Birchcliff’s capital expenditure program and for general corporate purposes.

“Notwithstanding these assets sales, the borrowing base under our credit facilities will remain at $950 million, which is a testament to the quality of our reserves. As a result of these transactions, we expect that our operating, transportation and marketing and interest costs will decrease on a per unit basis, reducing our already low-cost structure,” said Tonken.