Pengrowth Energy (PGH) Says Achieves $700M Disposition Target

July 16, 2013 3:41 PM EDT
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Pengrowth Energy Corporation (NYSE: PGH) announced that it has entered into agreements for the successful completion of its $700 million non-core asset disposition program previously announced on January 11, 2013. The net proceeds from the disposition program will be used to fund ongoing capital expenditures, including fully funding the remaining budgeted capital expenditures associated with the 12,500 barrels per day (bbl/d) first commercial phase of the Lindbergh thermal project, which received regulatory approval on July 15, 2013.

The expected net proceeds from these non-core asset dispositions, in addition to the $316 million net proceeds received from the previously announced Weyburn non-core asset divestiture in March of this year, will bring total 2013 non-core disposition proceeds to approximately $1.0 billion.

"As we have outlined throughout the year, our focus in 2013 has been to demonstrate that we have the funds in hand to develop the first commercial phase of the Lindbergh project," said Derek Evans, President and Chief Executive Officer of Pengrowth. "These combined transactions achieve our goal of disposing of $1.0 billion of non-core assets in 2013 and fully funding the first commercial phase of the Lindbergh development. We are very pleased with the results of our disposition program, particularly given the competitiveness of the current asset disposition market."

Southeast Saskatchewan Non-Core Asset Disposition

As part of the $700 million, Pengrowth is pleased to announce that it has entered into an agreement to sell its interests in its non-core southeast Saskatchewan properties to a junior Canadian oil & gas company for $510 million, subject to closing adjustments.

The assets being sold currently produce more than 5,700 barrels of oil equivalent per day (boe/d) (93% liquids) and had proved plus probable reserves of 21.3 million barrels assigned to them at December 31, 2012, according to the independent reserve evaluators GLJ Petroleum Consultants Ltd.

Subject to customary regulatory and other closing conditions, the southeast Saskatchewan disposition is expected to close in mid-September 2013 and will have an effective date of June 1, 2013. BMO Capital Markets is acting as financial advisor to Pengrowth on this transaction.

Additional Asset Dispositions

In addition to the southeast Saskatchewan disposition, Pengrowth has closed or has letters of intent executed with purchasers for an additional $203 million of non-core assets, representing approximately 5,900 boe/d of net production (72% natural gas) and 29.0 mmboe of associated proved plus probable reserves. Average implied transaction metrics for these minor additional dispositions equates to approximately $34,400 per flowing barrel and $7.00 per boe of proved plus probable reserves. These additional transactions have various closing dates throughout 2013.

Financial and Guidance Update

At June 30, 2013, Pengrowth had $1.4 billion of fixed term notes and $234 million of convertible debentures outstanding and was undrawn on its $1.0 billion committed bank facility. Following closing of these dispositions, at September 30, 2013, Pengrowth expects to remain undrawn on its bank facility and anticipates having $575 million of cash on hand, a portion of which will be used to fund fully the capital expenditures associated with the first commercial phase at Lindbergh.

On a pro-forma basis, following these transactions, Pengrowth is now projecting fourth quarter 2013 production to average between 75,000 and 77,000 boe/d.

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