Penn West Said Working With RBC to Find Buyer for Viking Assetby , , and
Viking asset seen bringing in at least C$400 million
Producer forecast breaching debt covenants in second quarter
Penn West Petroleum Ltd. has hired Royal Bank of Canada to sell its Dodsland Viking light oil assets in Saskatchewan, according to people familiar with the process.
The Calgary-based producer said last month it was working with lenders to avoid a default as it forecast it might breach financial covenants by the end of the second quarter.
Selling the Viking, a high-margin primary area of focus for Penn West, is seen by analysts including Brian Kristjansen at Dundee Capital Markets as an eleventh-hour move to stay afloat. The Viking asset could bring in at least C$400 million ($305 million) or more, Kristjansen said in a note last month. The producer has been coping with high debt amid an oil market downturn that’s lasted almost two years.
“It’s a measure of last resort, but Viking asset sale potentially plugs the near-term hole,” Kristjansen said in the note. “Given the asset’s excellent netbacks, growth opportunities and recent efficiency gains it’s something that could be transacted on in a hurry, with several likely area competitors interested.”
A Penn West representative said the company doesn’t respond to market rumors, and was pursuing methods to reduce its debt and negotiate with its lenders. A representative for RBC declined to comment.