Published: Fri, March 31, 2017
Economy | By Melissa Porter

Cenovus to acquire ConocoPhillips' Canadian assets for $13.3bn

ConocoPhillips plans to sell its stake in a Canadian oil sands project and separate natural gas assets for $13.3 billion to Canadian producer Cenovus Energy, the company said Wednesday.

"ConocoPhillips Canada will now focus exclusively on our Surmont oil sands and the liquids-rich Blueberry-Montney unconventional asset", Lance said in a statement.

The transaction is made up of $10.6bn cash, and 208mn Cenovus shares valued at $2.7bn as of March 28.

- Royal Dutch Shell and Marathon Oil also recently sold off assets in Canada. The company expects to record a gain on sale upon closing, which is expected in the second quarter of 2017. The deal will give Conoco a almost 25% stake in Cenovus, which lost $545 million (65 cents per share) on revenue of $12.134 billion a year ago. Additionally, Cenovus said it is selling 187.5 million shares at $16 each, or 8.3 per cent below the Wednesday close, to raise $3 billion.

At just after 10 a.m. ET on Thursday, Cenovus stock was trading at C$15.53 on the Toronto Stock Exchange.

But it also outweighs the company's C$12.8 billion market capitalization, prompting ratings agency DBRS to place Cenovus under review with negative implications.

He said ConocoPhillips signalled late past year it wanted to sell assets to pay down debt - the Cenovus sale allows it to do that while continuing to focus on shale oil in the US, plus a portfolio that includes production from Asia-Pacific and Europe.

"In a low oil price environment, economies of scale are important", Ferguson said on a conference call.

Osum Oil Sands Corp. bought the Orion steam-based oilsands project in June 2014 in Alberta's Cold Lake region from Shell for $325 million, which at the time was producing 6,700 barrels a day.

ConocoPhillips chairman and CEO Ryan Lance said: "This transaction will make an immediate and significant impact on the company's value proposition by allowing us to rapidly reduce debt to $20 billion and double our share repurchase authorisation to $6 billion".

For its buyback, Conoco will triple its planned 2017 repurchase to $3 billion from $1 billion, with the remaining $3 billion allocated to 2018 and 2019. Western Canadian Select averaged $39.14 per barrel last month, according to the Alberta government.

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