CALGARY – Penn West Petroleum Ltd said on Tuesday that it would sell its royalty interest in some Western Canadian oil fields to Freehold Royalties Ltd for $321 million to chop debt and weather low crude prices.
The deal involves Penn West\’s 8.5 per cent royalty from production in part of the Viking oil field in Saskatchewan, in addition to royalty payments and wholly owned lands in Alberta, Saskatchewan and Manitoba.
The sale comes after Penn West reached an agreement earlier this year with senior creditors to amend some debt covenants the organization could no more meet after oil prices came by more than half.
Penn West, whose shares have fallen 72 per cent over the past year, said the sale would meet up to 50 % of the $650 million the organization has promised to pay for the holders of its senior, unsecured notes.
Freehold, which acquires and manages gas and oil royalties paid by companies operating on lands they don\’t own, said hello would pay for part of the acquisition with a $297 million equity offer led by RBC Capital Markets and Canadian Imperial Bank of Commerce.
The clients are to issue 16.5 million shares at $18 each. The underwriters have the option to buy another 2.48 million shares if demand warrants.
Freehold said buying of 280,000 acres of royalty and mineral-title lands would add $14.Two million to its operating income this year and was near its current properties.
Penn West shares were up 20 Canadian cents at $2.78 on the Toronto Stock market, while Freehold last traded at $18.98, up 56 Canadian cents.
? Thomson Reuters 2015