Corporate News Blog - Cenovus to Sell Suffield Assets to International Petroleum Corp.
LONDON, UK / ACCESSWIRE / September 27, 2017 / Pro-Trader Daily looks at the latest corporate events and news making the headlines for Cenovus Energy Inc. (NYSE: CVE) ("Cenovus"), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=CVE. The Canadian integrated oil Company announced on September 25, 2017, that it has entered into a definitive agreement to sell its Suffield crude oil and natural gas operations in southern Alberta to International Petroleum Corporation for gross cash proceeds of approximately C$512 million ($416 million). Suffield Assets considered for sale include Cenovus's properties on Canadian Forces Base Suffield and the adjacent Alderson property. This represents Cenovus's second deal this month, keeping it in-line with its debt reduction plan. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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Transaction Details
- As of now, the transaction is subject to closing conditions. It is expected to close by the fourth quarter of 2017.
- For this transaction, BMO Capital Markets is serving as the financial advisor to Cenovus.
A Deferred Purchase Price Adjustment
- An important thing to note is that both parties have agreed upon a deferred purchase price adjustment. This would give Cenovus a chance to gain from the potential additional payments of up to C$36 million.
- As per the agreement, the deferred purchase price adjustment is a two-year commitment, commencing on January 01, 2018.
- The agreement highlights that International Petroleum would make payments to Cenovus for each month in which the average daily price of West Texas Intermediate (WTI) exceeds $55 per barrel (bbl) or the price of Henry Hub natural gas is over $3.50 per million British thermal units (MMBtu).
- Nonetheless, the deferred purchase price adjustment payments have been capped for each commodity while the combined payment is limited to a maximum of C$36 million.
Proceeds to Be Used to Reduce Debt Level
- Cenovus intends to utilize the proceeds from the Suffield sale, as well as those from the sale of Cenovus's Greater Pelican Lake assets, declared on September 05, 2017, to reduce its debt levels.
- The sale proceeds would be used to cutback Cenovus' C$3.6 billion asset-sale bridge facility, which it took to purchase oil sands assets from ConocoPhillips this year.
- Cenovus aims to gather C$5 billion from asset sales to lower its debt levels. Up till now, it has announced C$1.5 billion in divestitures, including the latest sale.
- The Company is dedicated to reaching its debt to income target. It aims to stay below two times net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Aim to Create Shareholder Value from Core Assets
Brian Ferguson, President and Chief Executive Officer at Cenovus, shared his views about the transaction. He stated that the Company is on its target with the financial plan, which was devised to deleverage Cenovus balance sheet after its recent transformational acquisition of assets in Western Canada.
He believes that the successful execution of Cenovus' planned divestiture program would enable the Company to focus on its core asset base. In fact, it would allow Cenovus to generate additional shareholder value from its core assets in the oil sands and Deep Basin.
Greater Production and Reserves for IPC
International Petroleum Corp (IPC), which is a spinoff of Norway's Lundin Petroleum AB, mentioned that this acquisition would more than triple its production and reserves.
IPC anticipates that the acquired assets, which include Cenovus' properties on Canadian Forces Base Suffield and the adjacent Alderson property, would generate approximately 24K boe/day during 2017.
Update on Sale of Cenovus's Palliser assets
The sale processes for Cenovus's Palliser assets in southern Alberta and the Weyburn carbon dioxide enhanced oil recovery operation in Saskatchewan are also progressing as per expectations. The Company anticipates that it would reach sale agreements for these two assets in the fourth quarter of 2017. Cenovus expects to raise around C$2.5 billion by selling its Weyburn and Palliser oil assets.
About Cenovus
Cenovus Energy works towards responsibly unlocking energy resources in the world. Its operations include oil sands projects in northern Alberta, which use specialized methods to drill and pump the oil to the surface; and it has an established natural gas and oil production in Alberta, British Columbia, and Saskatchewan. The Company also has 50% ownership in two US-based refineries.
Last Close Stock Review
Cenovus Energy's share price finished yesterday's trading session at $10.27, marginally sliding 0.58%. A total volume of 5.02 million shares have exchanged hands, which was higher than the 3-month average volume of 5.00 million shares. The Company's stock price skyrocketed 38.04% in the last one month and 41.66% in the past three months. Shares of the Company have a PE ratio of 5.44 and have a dividend yield of 1.56%. The stock currently has a market cap of $12.40 billion.
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