Pengrowth pares back more debt
On October22,2015 Pengrowth,a junior Canadian oil producer, announced that they had sold off a parcel of oil-bearing land in south east Alberta for $80 million.This land was sold for cash consideration of $80 million.The average daily production was 4200 barrels of oil equivalent per day (boe/day) of which 64% was liquids.Proved plus probable reserves were equal to 14 million boe.Annualized cash flow from these lands was $18 million on an annualized basis.This seems to be below the rate experienced by other producers in Alberta.Penn West,for example, was getting a higher multiple recently.This may have something to do with the necessary costs associated with it to deliver the product to market.
The Disposition Program
Pengrowth says in their release that total proceeds from their dispositions in 2015 will be in excess of $300 million.This is considerably less than Penn West or Lightstream Resources' dispositions.However Pengrowth is quick to add that they have packages in the market that have generated additional cash offers in excess of $450 million.Also it expects to make their target of $600 million in asset dispositions for 2015.Proceeds will be used to reduce debt.Pengrowth needs to keep their capital expenditure program in tact for further investment in their newer projects such as the Lindberg heavy oil project and the Swan Hills light oil project plus the Montney natural gas project.
Summary
This blog sees the light turning on and symbolically takes this as a good strategic asset disposition.The price may be a little bit low but it will bring operational efficiencies and cash necessary to reduce debt.Pengrowth says that the efficiencies will come from reducing the well bore count by 3000 wells with this disposition.More importantly this disposition will not reduce total production of 70,000 to 72,000 boe/day. Pengrowth has kept it's production at the same rate for about two years.This has been permitted by the increased production from it's Lindberg heavy oil project.Lindberg should have a production rate of about 16,000 barrels per day according to past releases.This may be ramped up to 30,000 barrels by the end of 2016.Hopefully the price of oil will be approaching $60 per barrel in 2016 with this increased production.
see Blogdaleup for consulting on resource stocks; use Blogdaleup for financial analysis on resource stocks
The Disposition Program
Pengrowth says in their release that total proceeds from their dispositions in 2015 will be in excess of $300 million.This is considerably less than Penn West or Lightstream Resources' dispositions.However Pengrowth is quick to add that they have packages in the market that have generated additional cash offers in excess of $450 million.Also it expects to make their target of $600 million in asset dispositions for 2015.Proceeds will be used to reduce debt.Pengrowth needs to keep their capital expenditure program in tact for further investment in their newer projects such as the Lindberg heavy oil project and the Swan Hills light oil project plus the Montney natural gas project.
Summary
This blog sees the light turning on and symbolically takes this as a good strategic asset disposition.The price may be a little bit low but it will bring operational efficiencies and cash necessary to reduce debt.Pengrowth says that the efficiencies will come from reducing the well bore count by 3000 wells with this disposition.More importantly this disposition will not reduce total production of 70,000 to 72,000 boe/day. Pengrowth has kept it's production at the same rate for about two years.This has been permitted by the increased production from it's Lindberg heavy oil project.Lindberg should have a production rate of about 16,000 barrels per day according to past releases.This may be ramped up to 30,000 barrels by the end of 2016.Hopefully the price of oil will be approaching $60 per barrel in 2016 with this increased production.
see Blogdaleup for consulting on resource stocks; use Blogdaleup for financial analysis on resource stocks
Comments
Post a Comment