Cenovus CEO to be replaced, noncore asset up for sale

Cenovus CEO Brian Ferguson replaced after ConocoPhillips deal

Cenovus CEO Brian Ferguson will be replaced after the unpopular deal to purchase ConocoPhillips oilsands assets in March sent company shares plummeting by half, wiping out nearly $7 billion in value.

Following the announcement, shares in the Alberta oilsands company fell a further 10 per cent.

The company has yet to name a successor.  Ferguson will stay on as CEO until October while the company looks for a new chief and Ferguson will remain at Cenovus in an advisory role until March of next year.

According to Reuters, the delay in naming a successor upset investors who were looking for a quick change.

Norman Levine, managing director of Portfolio Management Corporation told Reuters “The whole thing just smells bad.” He added, “It would be better if there was a clean goodbye.”

Levine’s company does not hold shares in Cenovus.

The company also reported on Tuesday that it plans to sell $4 billion to $5 billion in noncore assets by the end of the year to reduce debt it took on to close the deal with ConocoPhillips. Cenovus had said in the past it would divest oil assets valued at over $3.6 billion, including Pelican Lake and Suffield.

Reuters reports the company may also sell part of the Deep Basin gas field in western Alberta which was acquired as part of the ConocoPhillips deal, and Marten Hills.

At an investors’ meeting in Toronto on Tuesday, Ferguson said Cenovus may also sell its Palliser and Weyburn projects in a deal that could be announced in the fourth quarter.

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After the ConocoPhillips deal went through, Cenovus reported its assets had doubled and the company said it would be able to produce crude at lower costs. But, investors were not convinced and said the move into the gas market hurt the company’s balance sheet and diversified it too far from the core oilsands business.

Investors had called for a shakeup at the top.

“A change in management would probably provide a bigger boost to the share price than any positive surprise in terms of asset sale,” Len Racioppo, managing director of Toronto-based Coerente Capital Management told Reuters on Monday.

Tumbling oil prices contributed to falling Cenovus shares and investors are focussing on the need for the company to make debt payments, according to Manash Goswami, portfolio manager at First Asset Investment Management.

On Tuesday morning, Cenovus shares dropped 10.7 per cent to $9.20.