Penn West Petroleum Ltd. says it is turning the page on its financial woes with a deal to sell one of its main oil-producing assets, removing the spectre of bankruptcy that has dogged the company and weighed heavily on its shares.

But its transformation into an Alberta-focused producer follows years of resistance to breaking the company up and the rejection of a multibillion-dollar takeover offer from one of China's biggest energy companies.

Penn West announced late Friday a deal to sell its Viking Dodsland property in Saskatchewan to privately held Teine Energy Ltd. for $975-million. It will jettison production of nearly 14,000 barrels a day (b/d).

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Chief executive officer David Roberts, in an internal memo, heralded the deal as the end of a three-year process to "fix a very broken organization."

Only last month, it warned of a potential bankruptcy as it sought breaks on debt terms. It now expects its net debt levels to fall to about $600-million from $2.1-billion at the end of 2015.

"Today, I am happy to announce that we have come out from the shadows of the past and are facing a bright future for Penn West and its employees," Mr. Roberts told staff, according to a copy of the memo obtained by The Globe and Mail.

It is a dramatically shrunken company. Penn West expects to finish 2016 with production of about 20,000 barrels of oil equivalent a day (boe/d), and grow at 10 per cent a year.

That assumes it is able to sell additional holdings pumping roughly 20,000 b/d, leaving its main assets in the Cardium region of Alberta. In early 2013, the company's output topped 140,000 boe/d.

Chief financial officer David Dyck on Monday insisted the latest deal was not a "forced liquidation" driven by lenders. However, analysts at Barclays PLC said the sale was necessary to avoid a breach of financial terms tied to its debt load. The company also struck a separate deal to sell some Alberta properties for $140-million.

The Viking transaction is a drastic move, but necessary, said Jeremy McCrea, an analyst at Raymond James Ltd. It means the company's debt-to-cash flow ratio will fall to 3.9 times in 2017 from 13 times at the end of 2015, he said.

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It didn't have to be this way. Penn West in mid-2013 received a takeover bid from Chinese state-run Sinopec Ltd. for between $13 and $14 a share, sources close to the negotiations said. "It was a serious offer from a serious company," one source said.

At the upper end of the range, the offer would have topped $6.8-billion for Penn West, plus the assumption of its debt. As it stands, even following the 39-per-cent stock price gain to $1.61 a share on Monday in response to the company's asset sale, Penn West has a market capitalization of $823-million – 88 per cent below the implied value of the spurned Sinopec offer.

The board didn't take the proposal to Penn West shareholders. Instead, in June of that year, the debt-saddled company cut 200 jobs, slashed its dividend and embarked on a sweeping strategic review under Mr. Roberts, its then-newly installed chief executive officer.

Penn West was already facing a lawsuit alleging it improperly compensated former board members and executives. A separate accounting scandal and subsequent lawsuits followed in mid-2014, and were settled in February.

Then energy prices collapsed, forcing the company to jettison numerous assets to ward off lenders. That process culminated in the sale of all of its Saskatchewan oil properties last week.

Sinopec's takeover proposal came after six months of due diligence, one source said. It landed shortly after Penn West overhauled its board. The company did not respond to a call and e-mail seeking comment Monday. It also did not take questions from media on a conference call to discuss the latest asset sale.

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In May, 2013, Rick George, Suncor Energy Inc.'s former CEO, was appointed chairman. Allan Markin, who helped build Canadian Natural Resources Ltd., was installed as vice-chairman, although his tenure was short-lived.

By June of that year, former CEO Murray Nunns informed the board of his intention to retire, the company said in a statement. Mr. Roberts would take over in the middle of that same month.

The proposed takeover followed a wave of Chinese investment in Canada's oil patch, including CNOOC Ltd.'s $15.1-billion (U.S.) acquisition of struggling Nexen Energy Inc.

That deal prompted then-prime minister Stephen Harper to impose new restrictions on state-owned companies in the oil sands, a move bankers and analysts blamed for a sudden drop-off in investment by such firms.

Those involved in talks between Penn West and Sinopec were prepared to hive off Penn West's oil sands assets if Canadian bureaucrats determined the transaction would contravene the new rules, one source said.

Penn West holds its annual shareholder meeting June 23 in Calgary.