“Poor” Cenovus (Encana spawn) buying most of ConocoPhillips Canadian Assets for $17.7 Billion, Suffield Block up for sale. “We will expect our Canadian Forces to hold a party of hotdogs and beans to celebrate getting rid of a major Canadian polluter!!”

Subject: encana (now cenovus) selling suffield to help buy conocophillips’ canadian assets (at $17.7 billion)
Date: Thu, 30 Mar 2017 12:54:31 -0600
From: Stewart Shields <email hidden; JavaScript is required>
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The Canadian Armed Forces will be delighted that the constant pain they have been asked to endure is finally leaving!! The Armed forces should challenge the AER’s right to regulate any operator in the Suffield block-and put a complete stop to carpet-bomb drilling and allowing newly drilled wells to dodge proper royalty payments under the “Low Productivity Program” We will expect our Canadian Forces to hold a party of hotdogs and beans to celebrate getting rid of a major Canadian polluter!! Hoooooray!

Stewart Shields

Cenovus Energy shares drop most in company’s history as investors snub $17.7 billion oilsands deal by Alex Nussbaum, Kevin Orland and Robert Tuttle, Bloomberg News, March 30, 2017, Financial Post

Cenovus Energy Inc. fell more than 10 per cent, the most since its 2009 debut, after saying it will buy Canadian oil assets from ConocoPhillips for $17.7 billion in a deal partly financed with shares.

The pros and cons of Cenovus Energy’s massive acquisition

Analysts weigh in on deal that gives a Canadian company full control of its oilsands assets, but takes on a lot of debt doing so. Find out more

The agreement, announced after the close of trading Wednesday, will double the Calgary-based producer’s reserves and production in the latest sale of energy assets in Canada by international companies stung by falling oil prices.

While Cenovus shares fell, Houston-based Conoco was having its best day in four months, rising 6 per cent to US$48.69 in New York.

Conoco is set to get 208 million shares in the deal, which it said Wednesday it will liquidate within six months. Additionally, Cenovus said it is selling 187.5 million shares at $16 each, or 8.3 per cent below the Wednesday close, to raise $3 billion. Cenovus acquires Conoco’s half interest in a joint venture with Cenovus in Canada’s oil sands and most of Conoco’s Deep Basin conventional assets in Alberta and British Columbia.

“This is an easy fit,” said Michael Kay, an analyst at Bloomberg Intelligence in New York. “ConocoPhillips is focused elsewhere, and Cenovus has made it a priority to expand in the oil sands. It’s mostly a domestic industry now.”

Combined, the holdings in the agreement can produce 298,000 barrels of oil equivalent a day in 2017. The transaction, expected to close in the second quarter, will make Conoco into Cenovus’s largest shareholder, with about a 25 per cent stake.

The sale comes two weeks after Canadian Natural Resources Ltd. agreed to spend $12.7 billion to buy assets in Alberta from Royal Dutch Shell Plc and Marathon Oil Corp. It follows by a month Conoco’s announcement that its reserves fell to a 15-year low after removing oilsands barrels that were uneconomic as crude prices sat below US$50 a barrel.

The acquisition allows Cenovus “to take full control of our best-in-class oilsands projects and to add a second growth platform across the prolific Deep Basin that provides complementary short-cycle development opportunities,” said Brian Ferguson, Cenovus chief executive officer.

With about 440,000 barrels a day of capacity after the acquisitions, Cenovus will be the third largest oil-sands producer by the end of the decade, behind Suncor Energy Inc. and Canadian Natural, according to company statements.

Deal Details

Along with the share sales, Cenovus has a $10.5 billion bridge loan in place with Royal Bank of Canada and JPMorgan Chase & Co., the company said in a statement announcing the acquisition after the close of trading on Wednesday. Cenovus will also make contingency payments to Houston-based Conoco over five years, if oil prices rise above $52 a barrel.

In a separate statement, Conoco said it would use the proceeds to reduce debt to $20 billion in 2017, and to double a share repurchase program to $6 billion. The company plans to triple its buybacks this year to $3 billion, with the remaining $3 billion spent in the next two years.

Conoco doesn’t plan to remain a shareholder in Cenovus for the long-term, Chief Financial Officer Don Wallette Jr. told analysts on a conference call Wednesday. After a six month pause mandated by the deal, “we will liquidate our position over time and do it in an orderly way.”

Maximizing Value

“We were just looking for the maximum value that we could get for the assets, and that happened to come from a combination of cash and equity and the contingent payment,” he said.

The transaction will be Cenovus’s biggest since it was separated from Encana Corp. in 2009. In that split, Encana retained most of the previous company’s natural gas assets, while Cenovus held the oil assets. The current deal is the largest in the Canadian oil patch since CNOOC Corp. bought Nexen Energy for $17 billion in 2012.

The industry has long been hampered by a lack of adequate transport options to move its crude to market. A series of proposed pipelines — and renewed support in the U.S. for the Keystone XL project — may help to ease a bottleneck that has kept Western Canadian oil prices below global benchmarks.

Canadian Natural, Cenovus and MEG Energy Corp. have announced expansion projects in the past five months that will add a total of 110,000 barrels a day of capacity when completed in 2019. [Emphasis added]

Cenovus shares tumble following $17.7B deal to buy Conoco’s Canadian oil assets by Alex Nussbaum, Kevin Orland and Robert Tuttle, Bloomberg News, March 30, 2017, Calgary Herald

Cenovus Energy Inc. fell the most since its trading debut more than seven years ago after agreeing to buy Canadian oil assets from ConocoPhillips for $17.7 billion in a deal that increases its risks at a time of uncertain oil prices.

Cenovus (TSX:CVE) is paying Conoco $14.1 billion in cash and 208 million shares for its 50 percent stake in their Foster Creek and Christina Lake oilsands venture, plus most of its conventional assets in the Deep Basin of Alberta 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 the Calgary-based producer’s 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 $10.5 billion bridge loan and selling $3 billion of shares at a discount to recent prices.

“Cenovus’ risk profile has drastically changed with this deal,” Chris Cox, an analyst at Raymond James in Toronto, said in an interview. “The company had one of the strongest balance sheets in its peer group, to now unequivocally having the highest-risk profile of the Canadian large caps.”

Cenovus limited its upside on the acquisition by agreeing to make contingent payments to Conoco over the next five years if Western Canadian Select prices rise above $52 a barrel. Also weighing on Cenovus shares was Conoco’s statement that it plans to start liquidating its holdings in the stock after a six-month lockup period.

Shares Tumble

Cenovus shares slid as much as 13 percent to $15.24 in Toronto, the biggest intraday decline since it was spun off from Encana Corp. in November 2009. The shares already were down 14 percent this year through yesterday. Meanwhile, Houston-based Conoco had its best day in four months, rising as much as 9.7 percent to $50.41 in New York.

The sale comes two weeks after Canadian Natural Resources Ltd. agreed to spend C$12.7 billion to buy assets in Alberta from Royal Dutch Shell Plc and Marathon Oil Corp. It follows by a month Conoco’s announcement that its reserves fell to a 15-year low after removing oil-sands barrels that were uneconomic as crude prices sat below $50 a barrel.

The new assets allow Cenovus “to take full control of our best-in-class oil sands projects and to add a second growth platform across the prolific Deep Basin that provides complementary short-cycle development opportunities,” said Brian Ferguson, Cenovus chief executive officer.

Largest Shareholder

Combined, the holdings in the agreement can produce 298,000 barrels of oil equivalent a day in 2017. The transaction, expected to close in the second quarter, will make Conoco into Cenovus’s largest shareholder, with about a 25 percent stake.

With about 440,000 barrels a day of capacity after the acquisitions, Cenovus will be the third-largest oil-sands producer by the end of the decade, behind Suncor Energy Inc. and Canadian Natural, according to company statements.

In a separate statement, Conoco said it would use the proceeds to reduce debt to $20 billion in 2017, and to double a share repurchase program to $6 billion. The company plans to triple its buybacks this year to $3 billion, with the remaining $3 billion spent in the next two years.

“We were just looking for the maximum value that we could get for the assets, and that happened to come from a combination of cash and equity and the contingent payment,” Chief Financial Officer Don Wallette Jr. told analysts on a conference call Wednesday.

Conoco doesn’t plan to remain a shareholder in Cenovus for the long-term and will sell its position “over time and do it in an orderly way,” he said.

Maximum Value

The transaction will be Cenovus’s biggest since it was separated from Encana Corp. in 2009. In that split, Encana retained most of the previous company’s natural gas assets, while Cenovus held the oil assets. The current deal is the largest in the Canadian oil patch since CNOOC Corp. bought Nexen Energy for $17 billion in 2012.

The industry has long been hampered by a lack of adequate transport options to move its crude to market. A series of proposed pipelines — and renewed support in the U.S. for the Keystone XL project — may help to ease a bottleneck that has kept Western Canadian oil prices below global benchmarks.

Canadian Natural, Cenovus and MEG Energy Corp. have announced expansion projects in the past five months that will add a total of 110,000 barrels a day of capacity when completed in 2019.

Despite the risks, Cenovus’ purchase of the Conoco assets makes strategic sense, said Benny Wong, an analyst for Morgan Stanley. The deal gives Cenovus full strategic control of the oil-sands project and will allow it to provide increased clarity about its long-term outlook, he said in a note Thursday.

“Acquiring producing assets that are familiar and top-tier is a much more welcome scenario for the market rather than accelerating spend to develop new projects and have to wait several years before seeing cash flow,” Wong said.

Comment by Ken Clawson · Calgary, Alberta
There goes another 17Billion out the door. Money that will be used in other jurisdictions. [Emphasis added]

A tale of two oilsands’ deals: Why the market liked Canadian Natural Resources but not Cenovus

Cenovus Energy buying most of ConocoPhillips’s Canadian assets for $17.7B by The Canadian Press, March 29, 2017, Calgary Herald

Cenovus Energy (TSX:CVE) of Calgary says it will spend $17.7 billion to acquire most of the Canadian assets of ConocoPhillips, making the Houston-based company the latest international player to reduce its exposure to the oilsands.

Cenovus CEO Brian Ferguson is calling it a “transformational acquisition.”

The deal includes ConocoPhillips’s 50 per cent interest in the FCCL Partnership, an oilsands venture between the two companies in northern Alberta, as well as the majority of ConocoPhillips’s Deep Basin conventional assets in Alberta and British Columbia.

Combined, the assets have forecast 2017 production of approximately 298,000 barrels of oil equivalent per day.

The price includes $14.1 billion in cash and 208 million Cenovus common shares.

Cenovus says the financing for the deal is in place and plans to raise $3 billion in an offering of shares to help pay for the acquisition.

Cenovus also says it has put its legacy Alberta conventional assets at Pelican Lake and Suffield up for sale and plans to sell additional non-core conventional assets.

The money raised from those sales is expected to be applied against the company’s bridge loans. [Emphasis added]

Cenovus to buy ConocoPhillips’ Canadian assets for a massive $17.7 billion by Geoffrey Morgan, March 29, 2017, Financial Post

CALGARY – Cenovus Energy Inc.’s $17.7 billion deal with ConocoPhillips will result in more concentrated Canadian ownership in the oilsands, and also turn previously pure-play Cenovus into a significant natural gas producer.

Cenovus announced Wednesday a blockbuster acquisition of ConocoPhillips’s 50 per cent stake in the oilsands assets the two companies previously co-owned and also ConocoPhillips’ conventional oil and natural gas assets in west-central Alberta and northeastern B.C.’s Deep Basin for $17.7 billion.

Brian Ferguson, president and CEO of Cenovus, called the deal “a unique opportunity to take full control of our oilsands assets,” on a conference call and added that it would double his company’s total production and reserves.

The deal will turn Cenovus into the third largest oilsands producer, behind only Canadian Natural Resources Ltd. and Suncor Energy Inc., and is being funded with 208 million Cenovus shares, cash and bridge loans. The company also announced it would raise $3 billion in a bought deal by selling 187.5 million shares.

“Given that we already fully operate the (joint-venture) assets, we are effectively doubling our oilsands exposure with no integration risk,” Ferguson said, adding, “We also view this transaction as a strategic opportunity to establish an expansive presence in the Deep Basin.”

Following the announcement, credit ratings agency DBRS Ltd. announced it would place Cenovus’ credit under review with negative implications because it would take on enough debt to “pressure” the company’s current credit rating.

“Depending on proceeds raised from asset sales (which are targeted for debt reduction), a rating downgrade is likely,” DBRS analysts wrote.

We are effectively doubling our oilsands exposure with no integration risk
Ferguson said Cenovus planned to sell off its Pelican Lake oilsands properties and some light oil assets in southeastern Alberta as a result of the deal, and the company would revisit its dividend once those assets sold.

Before DBRS released its note, Ferguson said he was confident the company could preserve its credit ratings following the “transformative” acquisition, which he expects will close in the second quarter.

“This is a natural consolidation,” Wood Mackenzie analyst Peter Agiris said in an interview, noting Cenvous’ long partnership with ConcoPhillips.

Canadian Natural Resources Ltd.’s $12.7-billion purchase of Shell’s oilsands assets this month and Athabasca Oil Corp.’s $836 million purchase of Statoil S.A.’s thermal facilities are other examples of Calgary-based companies consolidating in the oilsands.

He also said that while the deal does continue the trend of Canadian consolidation in the oilsands, ConocoPhillips isn’t exiting the heavy oil play as it will own roughly 20 per cent of Cenovus after the deal closes and retains a stake in the Surmont oilsands project with Total S.A.

The deal also transforms Cenovus into a natural gas player for the first time. 

Cenovus was spun out of Encana Corp. to focus on oil in 2009 but will now become a significant natural gas player in west-central Alberta and northeastern B.C. gas fields. The company plans to spend $170 million in the Deep Basin gas formation this year, ramping up significantly in 2018 and beyond, Ferguson said.

Some analysts jokingly called the new Cenovus, “Encana 2.0.”

“There’s some allure to being a pure play,” Agiris said of Cenovus, but added the ConocoPhillips deal would help diversify the company’s revenues and commodity exposure.

In addition to the natural gas production, Ferguson said Cenovus is acquiring 1.4 billion cubic feet per day of gas processing capacity that has largely been underutilized. He said the company plans to boost utilization through those facilities and increase gas production in the coming years. [Emphasis added]

[Refer also to:

2017 02 17: Cenovus (split from Encana after Ernst lawsuit papers served on the company) continues hoarding with $3.7B cash

2016 03 18: Trudeau names Brian Ferguson, CEO of Cenovus (company along with Encana that’s been reduced to junk bond status) to Economic Advisory Council, possibly the most influencial people to be around PM and Finance Minister Bill Morneau

2016 03 16: Will Albertans ever learn? Canada’s biggest oil producers, including Cenovus, hoarding near-record pile of cash

2015 10 08: Who believes what Cenovus or Encana say? And, just how cruel are those companies to their workers? Encana offspring Cenovus apologizes: a lot too little, too late

2015 06 30: Cenovus Energy sells royalty lands for $3.3 billion in cash after illegally fracturing Rosebud’s drinking water aquifers (then Encana), and getting away with it

2015 06 16: Gerard Protti Sings “I Wanna Stay.” Who is Gerry? Chair of Alberta’s Energy Regulator. AER is: Legally Immune, Charter Violating, “No Duty of Care,” 100 Percent Industry Funded, Deregulating, Non-Enforcing, Lying Propaganda Synergy Machine; Protti IS Director Petromanas; was Encana VP, Lobbyist, Advisor to Cenovus, Creator/Chair of CAPP, Director Alberta Research Council/Innovates …

2014 05 05: Encana, Cenovus, SPOG, The AER, Alberta Research Council (ARC), Alberta Environment and the Alberta Government gave funding to the Pembina Institute, long time synergizer

2014 03 15: Alberta Petro State: Cenovus, Syncrude and Suncor and other oil and gas companies “helping draft” curriculum for students from kindergarten to Grade 12!

2014 03 05: Encana selling two Calgary downtown properties, one owned jointly with Cenovus

2012 12 01: Environment minister turns down Cenovus [split from Encana] Energy project over wildlife risk, EnCana Makes First Court Appearance after Being Charged with Violating Canada Wildlife Act

2012 01 17: Cenovus, previously Encana, donates $250,000 to the Drumheller Library (near Rosebud) in exchange for naming rights on the Children’s Corner, Youth Area and Community Programs Room ]

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