Penn West Petroleum (PWT:TSX) outperformed every stock in June’s Stock Challenge Monday following the announcement of a $1.1 billion asset sale.

These types of deals usually take place after a sector has rebounded from a prolonged downturn or near a top. If this is a sign, the bottom is in for junior oil and gas stocks, it could be good news for the entire sector.

Penn West sells Saskatchewan Assets for $975 Million

Friday afternoon, Penn West announced a $1.1 Billion asset sale, which included the sale of its Saskatchewan assets for $975 million. The news sent its stock 38% higher Monday.

The subtitle of Penn West’s press release read:

Transforms Penn West Into A Leading Alberta Oil Producer

The definitive agreement involves the sale of all of its Saskatchewan assets, including its Dodsland Viking area, for cash consideration of $975 million and is subject to normal closing adjustments.

The company reported,

“This transaction, together with additional Alberta asset dispositions for proceeds of approximately $140 million, is expected to close in the second quarter. The total cash consideration from asset dispositions to date in 2016 is approximately $1.3 billion, reducing our pro forma Net Debt to approximately $600 million from $2.1 billion at year-end 2015. As a result, we expect to be comfortably in compliance with all of our financial covenants at the end of the second quarter and the remainder of 2016.

David Dyck, Senior Vice President and Chief Financial Officer of Penn West, stated, “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.”

He went on to note,

“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…”



Penn West is not alone in trying to reduce debt in the Canadian oil sector and reported,

“We expect to realize nearly $100 million annually as a result of decreased interest expenses and significant reductions in G&A expenses through this transaction, which more than offsets the loss in net operating income associated with the Saskatchewan properties(1).”


Dougal rises after Penn West bounce

Past Stock Challenge Champ ‘Dougal‘ saw his combined average return jump 26.80% higher Monday to capture the Daily Stock Challenge Breakout award.

Four of the top five and five of the top seven Challengers at this point in June’s Stock Challenge are past Stock Challenge Champs.

Long-time member, Winnipeg-native and past Stock Challenge Champ ‘Chauncey Gardiner‘ is leading the herd with his 64.18% return thus far. Dougal is now just 10% back of Gardiner after Penn West’s move today. It’s not even mid-month and things are getting interesting!


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