The sale is a part of Penn West Petroleum’s effort to streamline and high-grade the remainder of portfolio to grow reserves, production and funds flow from operations.
Teine Energy, a Viking producer backed by the Canada Pension Plan Investment Board, will acquire the Saskatchewan assets which are split between medium and heavy oil properties in the West and the Dodsland light-oil properties in the East.
Penn West CFO senior vice president David Dyck said: "Saskatchewan is a coveted asset amongst many of our competitors and with this transaction we have capitalized on the demand for high-quality oil assets of scale.
"This is a pivotal transaction for the company. While we have made significant progress over the past three years in reducing our total debt, this asset sale results in a markedly improved capital structure and positions the Company in the top tier of our peers in terms of all significant debt metrics."
With the deal, Teine Energy will assume a core position within the Saskatchewan Viking light oil play as well as low decline heavy oil properties currently under water flood.
Penn West CEO and president Dave Roberts said: "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."
Penn West expects the combination of a concentrated asset portfolio, lower operating cost base, and reduced interest expense burden to improve its production by approximately 10% annually well into the next decade.
Subject to the receipt of all necessary regulatory approvals, deal is planned to be completed in the second quarter of 2016.
