Pengrowth will use the sale to further reduce its level of debt
Pengrowth Energy Corporation announced it entered into an agreement for sale of a portion of its Swan Hills assets in North Central Alberta for total cash consideration of $180 million, the company said in a press release.
The sale of the Swan Hills assets is in keeping with the company’s strategy to de-lever its balance sheet while allowing it to streamline and high-grade its remaining portfolio, and to concentrate on its core assets that are expected to position the company for substantial per share increases in reserves, production and cash flow.
The buyer is an unidentified private Calgary-based corporation focused on light oil exploitation and development in central Alberta.
The divested assets generated average daily production of approximately 4,920 boe/d (weighted approximately 82 percent towards liquids) during the fourth quarter of 2016 and had Proved plus Probable (2P) reserves of 31 million boe as at Dec. 31, 2016, according to the independent reserve evaluators GLJ Petroleum Consultants Ltd.
This transaction will allow Pengrowth to further reduce its level of debt. The company expects to use a portion of the sale proceeds to pre-pay the remaining outstanding US $100 million (equivalent Cdn $134 million) of the 6.35 per cent senior term notes which are scheduled to mature on July 26, 2017.
Following this prepayment, Pengrowth will have no outstanding debt maturities in 2017 and the company’s proforma net debt as of May 31, 2017 will fall to approximately Cdn $970 million.
The effective date of the sale is Jan. 1, 2017 and closing is expected to occur on May 31, 2017, subject to the receipt of all necessary regulatory approvals and the satisfaction of other customary closing conditions.
In light of the announced transaction, Pengrowth is taking this opportunity to update its 2017 corporate guidance to reflect the changes that result from the sale and its increased concentration on its core assets.
Full year 2017 average production guidance is expected to be impacted by approximately 3,100 boe per day, resulting in revised 2017 production to be between 47,000 and 49,000 boe per day.
The remaining changes to 2017 guidance resulting from the sale are outlined in the table below:
| Original Guidance | Revised Guidance | ||
| Average daily production (boe per day) | 50,000 to 52,000 | 47,000 to 49,000 | |
| Total capital expenditures ($ millions) | 125 | 125 | |
| Funds flow from operations1 ($ millions) | 195 | 170 | |
| Royalties2 (% of sales) | 9.0 | 9.0 | |
| Operating costs3 ($ per boe) | 13.25 to 13.75 | 13.00 to 13.50 | |
| Cash G & A3 ($ per boe) | 3.50 to 4.00 | 3.50 to 4.00 | |
| 1. Based on a WTI crude oil price of US $55.00/bbl, an AECO natural gas price of Cdn $3.25/Mcf and a $0.74 USD/Cdn exchange rate | |||
| 2. Royalties are before impacts of commodity risk management activities | |||
| 3. Per boe estimates based on high and low ends of production guidance | |||
