(By Balaseshan) Penn Virginia Corp. (NYSE:PVA), an independent oil and gas company, said it would sell its Appalachian assets for $100 million in a move to lower indebtedness and improve liquidity.
The company has agreed to sell substantially all of its Appalachian assets, with the exception of the Marcellus Shale, to an undisclosed buyer for gross cash proceeds of $100 million.
The properties to be sold include vertical and horizontal coalbed methane and conventional properties, as well as royalty interests. The company plans to use the net proceeds from this sale to help fund its 2012 capital expenditure plan.
Chief Executive Baird Whitehead said the divestiture of these non-core natural gas assets will substantially reduce its indebtedness, improve its liquidity and fund further investment in its oily Eagle Ford Shale play in which the company had continuing success.
The effective date of the sale is January 1, 2012. The sale is expected to close before mid-August and is subject to customary purchase price adjustments and other customary closing conditions.
The properties had net production of about 20 million cubic feet of natural gas equivalent per day during June 2012, almost 100% of which was natural gas. As a result of the divestiture, Penn Virginia's 2012 production would decrease by an estimated 2.9 billion cubic feet of natural gas equivalent (Bcfe).
Estimated proved reserves associated with the divested properties, as determined by the company's third party engineers at year-end 2011, were 105.7 Bcfe, 96% of which were proved developed and 100% of which were natural gas.
In addition, as a result of this divestiture, the company plans to close its Canonsburg, Pennsylvania office, which will reduce its general and administrative expenses.
RBC Richardson Barr served as PVA's financial advisor in connection with the transaction.
PVA is trading down 2.06% at $6.67 on Tuesday. The stock has been trading between $3.92 and $14.05 for the past 52 weeks.