Cenovus Said to Seek $1.35 Billion in Asset Sales for Conoco Buy

  • Calgary producer taps BMO, CIBC and Barclays for asset sales
  • Pelican Lake could get C$1.2 billion, Suffield C$600 million

Cenovus Energy Inc. plans to raise about C$1.8 billion ($1.35 billion) from property sales as it seeks to offset the cost of its C$17.7 billion purchase of ConocoPhillips’ Canadian oil assets, according to people familiar with the matter.

The Calgary-based producer has hired Bank of Montreal to advise on the sale of its Suffield oil and natural gas drilling project in Alberta, which it hopes will fetch about C$600 million, said the people, who asked not to be identified because the matter is private. 

The company has also tapped Barclays Plc and Canadian Imperial Bank of Commerce to advise on the sale of its Pelican Lake asset in Alberta, which it hopes will raise about C$1.2 billion, the people said. Both Suffield and Pelican Lake are conventional drilling projects, in contrast to the oil-sands mining operations it’s agreed to buy from Conoco.

Cenovus said in a statement Wednesday announcing the deal that Pelican Lake and Suffield produced the equivalent of about 47,600 barrels of oil a day, consisting of nearly 29,000 barrels of crude and 112 million cubic feet a day of gas. The company said it expected to divest additional non-core conventional assets to streamline its portfolio.

Representatives of Cenovus, CIBC and Barclays declined to comment. BMO was not immediately available for comment.

Buyers Sought

Brian Ferguson, Cenovus chief executive officer, said on a call Wednesday that the sale processes have already started.

"Following completion of the acquisition, our top priority will be to optimize our asset portfolio and capital structure, including repaying the outstanding bridge loans," he said.

On Thursday, Cenovus’ shares fell the most since its trading debut more than seven years ago after it announced its plans to buy Conoco’s 50 percent stake in their Foster Creek and Christina Lake oil-sands venture and most of its conventional assets in the Deep Basin of Albert and British Columbia.

The deal is the latest sale of energy assets in Canada by international companies gravitating toward higher-profit drilling in U.S. shale basins. While the acquisition will double Cenovus’ reserves and production, it ties it heavily to one of the costliest methods of producing oil after prices sank below $30 a barrel just last year.

The deal also weakens its balance sheet, with Cenovus funding the cash portion of the deal by tapping its credit line, taking on a C$10.5 billion bridge loan and selling C$3 billion of shares at a discount to recent prices.

— With assistance by Kevin Orland, Alex Nussbaum, and Robert Tuttle

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