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Companies from Penn West Petroleum Ltd. to Athabasca Oil Co. are under pressure to sell assets to keep the money flowing.

Ben Nelms/Bloomberg

It's crunch time on asset sales for Canada's struggling oil producers.

Starting in earnest after Labour Day, oil and natural gas companies will begin the twice-yearly pilgrimage to their banks to discuss funding. It's not going to be easy, with companies from Penn West Petroleum Ltd. to Athabasca Oil Co. under pressure to sell assets to keep the money flowing.

With no relief from the price of oil, which has tumbled less than $50 (U.S,) a barrel, companies are cutting more staff, reducing dividends and even selling hedging positions on commodities and currencies to boost cash flow. Banks will next likely force some producers to sell their best assets to avert bankruptcy, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP in Calgary.

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"The banks are going to tell these guys to sell their coveted assets," said Mr. Tahmazian, who helps manage about $1-billion (Canadian) in energy funds. "That means the strong companies get to lick their chops."

The oil slump has already made victims out of many of Canada's fossil fuel producers, which have cut thousands of jobs, most of them in Calgary. Banks approached struggling producers in the spring and told them to do what they could to strengthen their balance sheets and find ways to raise funds, Mr. Tahmazian said. "This time, they won't be so friendly," he said.

The Standard & Poor's/TSX energy sub-index has lost about $85-billion in value this year, as the price of West Texas Intermediate crude touched its lowest point since 2009. Of the 63 members in the index, all but three have posted stock losses in the past 12 months, according to Bloomberg data. Companies have been reluctant to sell. There were 14 pending and completed oil and gas deals worth $418 million (U.S.) in Canada's oil patch in the third quarter, on pace for the the lowest quarterly value since at least 2003, according to data compiled by Bloomberg.

Penn West, which earlier this week cut its work force by 400 jobs, is still looking to sell properties after earning $1.5-billion (Canadian) over the past two years selling assets producing about 30,000 barrels of oil a day. The company is still in compliance with its financial covenants on its syndicated loan and notes.

"While the current commodity price environment poses challenges, we will continue to take a disciplined approach to our process and we remain confident in our ability to complete additional transactions to further advance our goal of debt reduction," the company said Sept. 1.

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