04/14/2015 03:58 EDT | Updated 06/22/2015 01:59 EDT

Penn West sells overriding royalty interest in properties to Freehold for $321M

CALGARY - Penn West Petroleum Ltd. (TSX: PWT) has announced a deal to sell an 8.5 per cent gross overriding royalty in certain properties to Freehold Royalties Ltd. (TSX:FRU) for $321 million in cash.

The sale involves Penn West working interests in a portion of the Viking play in the Dodsland area of Saskatchewan and certain of its existing royalties and mineral title lands in Alberta, Saskatchewan and Manitoba.

Closing is expected to occur by early next month, subject to regulatory and closing conditions, Penn West said in a statement Tuesday, adding that the cash will be used reduce senior debt.

"The proceeds represent approximately 50 per cent of Penn West's commitment to offer aggregate net proceeds of up to $650 million received from asset dispositions to prepay, at par, any outstanding principal amounts owing to the holders of our senior, unsecured notes," the statement said.

On the Toronto Stock Exchange, Penn West shares closed up 24 cents or 9.34 per cent to $2.81, while shares in Freehold Royalties rose 56 cents or 3.04 per cent to $18.98.