Teine Energy Ltd. has agreed to acquire all of fellow Calgary-based firm Penn West Petroleum Ltd.’s assets in Saskatchewan, including the Dodsland Viking area, for $975 million in cash. The deal is effective May 1 and expected to close in the second quarter.
Split evenly between medium and heavy-oil properties in the West and the Dodsland light-oil properties in the East, the assets cover 16,300 boe/d of production (91% is liquids) as of the first quarter, estimated proved plus probable reserves of 53.2 million boe (91% liquids), and 410,000 net acres of undeveloped land.
Teine, a Viking producer backed by the Canada Pension Plan Investment Board, acquires and develops oil and gas properties in the Western Canadian Sedimentary Basin, with 90% of its total production weighted towards crude oil and NGLs.
Dave Roberts, Penn West president and chief executive officer, explained the move from his firm’s perspective. “While the Dodsland Viking was an important contributor to Penn West’s growth profile in recent years, this transaction will allow us to replace these largely mature assets by funding the more prospective and numerous growth opportunities in our Cardium and Alberta Viking positions—areas where we are more focused and more competitive,” he said.
Penn West in the Cardium area has 700 net sections and 1,500 drilling locations, with first-quarter production of 19,500 boe/d. The firm notes the deal gives it the financial flexibility to begin exploiting the area’s multihorizon potential. In the Belly River and Mannville formations, the firm has 500 net sections that it believes are highly prospective and will form part of its development strategy over the next several years.
Penn West says that its technical understanding of the Viking play in recent years has extended into Alberta through an active farmout program as well as the exploratory findings and strong production results from offsetting peers. Its Alberta Viking position encompasses 174 net sections and has 500 potential drilling locations. First-quarter production from Viking in Alberta was 1,000 boe/d, but Penn West notes the area will be a primary focus of its 2017 development program.