Penn West said to be working with RBC to find buyer for Viking asset

CALGARY, Alberta (Bloomberg) -- Penn West Petroleum has hired Royal Bank of Canada to sell its Dodsland Viking light oil assets in Saskatchewan, according to people familiar with the process.

The Calgary-based producer said last month it was working with lenders to avoid a default as it forecast it might breach financial covenants by the end of the second quarter.

Selling the Viking, a high-margin primary area of focus for Penn West, is seen by analysts including Brian Kristjansen at Dundee Capital Markets as an eleventh-hour move to stay afloat. The Viking asset could bring in at least C$400 million ($305 million) or more, Kristjansen said in a note last month. The producer has been coping with high debt amid an oil market downturn that’s lasted almost two years.

“It’s a measure of last resort, but Viking asset sale potentially plugs the near-term hole,” Kristjansen said in the note. “Given the asset’s excellent netbacks, growth opportunities and recent efficiency gains it’s something that could be transacted on in a hurry, with several likely area competitors interested.”

A Penn West representative said the company doesn’t respond to market rumors, and was pursuing methods to reduce its debt and negotiate with its lenders. A representative for RBC declined to comment.