By August 4, 2017 0 Comments Read More →

CNRL among bidders for Cenovus ‘non-core’ assets as oil sands giant pays down debt

Cenovus

Cenovus is hoping to sell some of its portfolio to pay off debt it took on to pay for the $16.8 billion purchase of some ConocoPhillips assets last May.  Company photo.

Cenovus’ Suffield project and Deep Basin midstream assets up for sale

Cenovus Energy is entertaining bids from a number of companies, including CNRL, ARC Financial Corp and others, in the sale of the company’s $1 billion heavy oil project in Pelican Lake, Alberta, according to Reuters sources.

The Calgary-based company is also in advanced discussions on the sale of a project in Suffield, Alberta which is expected to garner between $500 million to $600 million.

Accelerate KootenaysReuters sources also say Cenovus has received interest from TransCanada, Enbridge, Pembina Pipeline, Keyera Corp and Inter Pipeline Ltd for all or part of the company’s midstream assets in the Deep Basin.  Reuters’ sources added there is no formal sale process underway for the assets which are located in northeastern BC and northwestern Alberta.

Cenovus shares rose on Friday as much as 6 per cent to $10.74, but by midday the stock had moderated gains and were at $10.49, still much higher than the 0.4 per cent gain for the benchmark Canada share index.

Wood Mackenzie analyst Mark Oberstoetter told Reuters that Cenovus shareholders and investors will be keeping a close eye on any news on the divestiture program.

“That’s a big focus for the second half of the year for them,” he said. “There’re probably many factors at play, and anything encouraging on a potential sale will be a positive for Cenovus, until we get an announcement.”

Cenovus has been looking for buyers for some of its portfolio to pay off debt it took on to fund the $16.8 billion purchase of some ConocoPhillips assets in May.  The purchase doubled the size of the company’s producing assets, but share prices dropped, prompting some share holders to revolt.

Last month, Cenovus said it expected assets sales could garner over $5 billion by the end of the year.

“With our increased size and scale and continued commitment to deleverage our balance sheet – our number one near-term priority – I believe the new Cenovus is well positioned to deliver significant value to shareholders in the years ahead,” said CEO Brian Ferguson in a July press release.

“Data rooms,” where prospective buyers can view confidential documents as part of their due diligence, for the Pelican Lake and Suffield assets in Alberta have been open since late March, and data rooms for the Palliser assets in Alberta and Weyburn assets in Saskatchewan were opened this month.

“While they are no longer core to Cenovus, these are high-quality assets that continued to deliver solid cash flows and safe and reliable performance in the second quarter,” said Ferguson.

“We anticipate announcing sale agreements for both Pelican Lake and Suffield later in the third quarter and for Palliser and Weyburn in the fourth quarter. With the successful completion of these divestitures we expect to make substantial progress towards our target of between $4 billion and $5 billion in announced asset sale agreements during 2017.”

Company spokesman Brett Harris told Reuters the Pelican Lake and Suffield sales processes were “proceeding well,”, but he declined to elaborate.

CNRL, Enbridge, Inter Pipeline, Keyera, Pembina and TransCanada all declined requests for comment.  ARC did not respond to a request for comment.

According to the Reuters’ sources, Cenovus has not yet decided on the timing for the sale of its midstream assets from the Deep Basin.  The company may hold off on any sale of the midstream assets until production increases, allowing Cenovus to fetch a higher price.

 

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