By March 30, 2017 Read More →

Cenovus shares fall after purchasing Conoco oilsand assets


Upon completion of the sale, Cenovus will be the sole owner of the Christina Lake (shown) and Foster Creek oilsands operations.  Company photo.

Cenovus purchase more than doubles production

Cenovus Energy shares suffered their biggest one-day percentage drop on Thursday after the company announced it C$17.4 billion deal to buy Alberta oilsands and natural gas assets from ConocoPhillips.

Cenovus shares fell 12.8 per cent on the Toronto Stock Exchange to $15.36, and ConocoPhillips shares rose 7.8 per cent.

The sale is the fifth-largest Canadian energy deal on record and more than doubles Cenovus’ production to 588,000 barrels of oil equivalent per day.  Upon completion of the deal, Cenovus will be the sole owner of the Foster Creek and Christina Lake oilsands projects.

Reuters reports ratings agency DBRS has placed Cenovus under review with negative implications, saying the acquisition also outweighs the company’s C$12.8 billion market capitalization.

Norman MacDonald, portfolio manager of the Trimark Resources Fund with Invesco told Reuters “I’m extremely disappointed – not just the price paid on this acquisition, but also the strategy.”


MacDonald added Cenovus focussed on unconventional crude and did not hold gas assets such as Deep Basin “And up until yesterday, they had a really good balance sheet.”

In a note to clients, Raymond Jones analysts said “Cenovus goes from exhibiting one of the strongest balance sheets in the peer group, to one of the most levered,” adding the company will be adding production at a time when pipeline capacity is getting squeezed.

Tim Pickering, founder and chief investment officer at Auspice Capital in Calgary says the Cenovus share slump would likely be temporary.  “On any big asset merger or any big change in a project like this, you’ve got to give it a few months to sort out where the efficiencies are,” he told Reuters.

This is the latest deal that sees Canadian players buy up assets as international oil majors pull out of the Alberta oilsands.  By purchasing northern Alberta assets, Cenovus, Suncor Energy and CNRL have doubled down on the oilsands.

Canadian Natural Resources minister Jim Carr said the recent consolidations in the oilsands showed Canadian investors have long-term confidence in the sector.

“If you look at recent transactions, you can come to the conclusion that Canadian investors are particularly interested and that’s fine. The markets ultimately will make these decisions,” Carr said on a conference call with reporters.

Since the start of the global oil price slide, Canadian oilsands producers have cut operating costs by about 30 per cent.  Companies are also hoping improvements in thermal extraction technology will help boost efficiency, allowing them to compete against US shale plays.


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