NEW YORK, NY / ACCESSWIRE / March 31, 2017 / Conoco and Cenovus of Canada have worked out a deal that benefits both companies in the long term. The deal is expected to be completed by the end of the second quarter of this year. The two stocks went in opposite directions in Thursday's trading.
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ConocoPhillips https://ub.rdinvesting.com/news/?ticker=COP
Cenovus Energy Inc. https://ub.rdinvesting.com/news/?ticker=CVE
ConocoPhillips advanced 8.81% to close at $50 on Thursday. The stock traded between $50.41 and $48.61 on a volume of 40.06 million shares traded. The uptick was brought about by the company's announcement that it would be selling most of its gas assets in Western Canada's Deep Basin to Cenovus Energy. Another part of the deal was that Conoco would sell its 50% investment in the Foster Creek Christina Lake oil sands that is a cash and stock deal that totals $13.3 billion and from which $10.6 billion will be received in cash.
Although the sale of gas assets is likely going to impact ConocoPhillips' revenue, with more cash availability from this deal, the company will be able to significantly deleverage its balance sheet by reducing debt to a level of $20 billion from the current level of nearly $26.2 billion and will also be able to repurchase more shares for a total of nearly $6 billion. The Oil and Gas industry has been facing turmoil in the last several years on account of decreasing revenues, higher cost and additionally higher leverage making investment unprofitable, ConocoPhillips is no exception to this. While revenues are still declining, the company has narrowed down losses in fiscal year 2016 to a GAAP loss of $3.6 billion, down from a GAAP loss of $4.4 billion in fiscal year 2015. A large number of investment firms have raised their recommendation of Conoco Philips stock from a "hold" to a "buy" rating.
Access RDI's ConocoPhillips Research Report at: https://ub.rdinvesting.com/news/?ticker=COP
Cenovus Energy fell 13.69% to close at $11.29 on Thursday. The stock traded between $11.89 and $11.28 on a volume of 45.05 million shares traded. An integrated oil company that has its headquarters in Calgary, Alberta, agreed to terms with Conoco Phillips to a $13.3 billion cash and stock trade for the Deep Basin and Foster Creek Christina Lake assets. Although the transaction is going to be accretive on immediate basis for Cenovus doubling its total production and reserves, in order to make the deal work, Cenovus is likely to have to sell some of its short term profit assets.
The company is seeking financing for the sale from several banks by selling some of its currently producing oil properties. They have hired the Bank of Montreal to provide counsel on the sale of their Suffield oil and natural gas drilling project in Alberta. That sale is hoped to be about C$600 million. In addition, the company has selected two advisors - Barclays Plc and Canadian Imperial Bank of Commerce – for its sale of the Pelican Lake asset in Alberta seeking C$1.2 billion to raise cash for the Conoco deal. Additionally with Cenovus' announcement on March 29th, a deal financing by issuing additional common shares for the amount in the range of C$3.0 billion to C$3.45 billion, is likely to dilute shareholder's interest.
Access RDI's Cenovus Energy Research Report at: https://ub.rdinvesting.com/news/?ticker=CVE
Our Actionable Research on ConocoPhillips (NYSE: COP) and Cenovus Energy Inc. (NYSE: CVE) can be downloaded free of charge at Research Driven Investing.
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