ConocoPhillips-Cenovus Deal Means Yet Another Multinational Bailing On Oilsands

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CALGARY — Cenovus Energy announced Wednesday it will spend $17.7 billion to acquire most of the Canadian assets of ConocoPhillips, making the Houston-based company the latest international player to reduce its exposure to the oilsands.

Cenovus CEO Brian Ferguson called it a "transformational acquisition'' for the Calgary-based company.

"The purchase of these assets is consistent with Cenovus's existing strategy and core competencies,'' Ferguson said in a statement.

"Consolidating our ownership at Foster Creek, Christina Lake and Narrows Lake has consistently ranked as our best strategic opportunity to increase leverage to a portfolio of top-tier oilsands assets.''

conocophillips phillips 66
A Phillips 66 gas station stands illuminated at night in Omaha, Nebraska, U.S., on Sunday Jan. 29, 2017. ConocoPhillips is the latest multinational energy company to exit the oilsands. (Photo: Christopher Dilts/Bloomberg via Getty Images)

The deal, which was announced after the close of markets, includes ConocoPhillips's 50 per cent interest in the FCCL Partnership, an oilsands venture between the two companies in northern Alberta, as well as the majority of ConocoPhillips's Deep Basin conventional assets in Alberta and British Columbia.

Combined, the assets have forecast 2017 production of approximately 298,000 barrels of oil equivalent per day.

The price includes $14.1 billion in cash and 208 million Cenovus common shares.

Cenovus has also signed a five-year agreement that will see it make additional payments to ConocoPhillips if the average daily price of Western Canadian Select rises above $52 per barrel. Western Canadian Select averaged $39.14 per barrel last month, according to the Alberta government.

ConocoPhillips chairman and CEO Ryan Lance called the deal a "win-win'' and said it would allow his company to reduce its debt.

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

Cenovus said the financing for the deal is in place and plans to raise $3 billion in an offering of shares to help pay for the acquisition.

Cenovus also said it has put its legacy Alberta conventional assets at Pelican Lake and Suffield up for sale and plans to sell additional non-core conventional assets.

The money raised from those sales is expected to be applied against the company's bridge loans.
Cenovus shares closed Wednesday up nine cents at $17.45 on the Toronto Stock Exchange.

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