ConocoPhillips sells Canadian assets

Canada

HOUSTON, March 30, 2017 – ConocoPhillips announced on Wednesday that it had agreed to sell oil and gas assets in Canada valued at USD 13.3 billion to Cenovus.

The deal covers its 50% stake in the Foster Creek Christina Lake oil sands partnership, as well as most of its western Canada Deep Basin gas assets, the company said in a statement.

ConocoPhillips will keep its 50% operating interest in the Surmont oil sands venture and its 100% stake in the Blueberry-Montney unconventional acreage, it added.

The transaction, which is expected to close in Q2, includes some USD 10.6 billion in cash, 208 million Cenovus shares valued at USD 2.7 billion and five years of uncapped contingent payments, to be triggered when Western Canada Select crude prices top CAD 52 (USD 38.9) per barrel.

“This transaction will make an immediate and significant impact on the company’s value proposition by allowing us to rapidly reduce debt to USD 20 billion and double our share repurchase authorization to USD 6 billion,” CEO Ryan Lance said in a press release.

“We will retain upside to future oil price increases through our equity stake in Cenovus and an uncapped, five-year contingent payment.”

The deal comes as ConocoPhillips begins to recover from losses incurred due to the low prices of oil and gas in recent years. Last year, it registered a loss of USD 3.6 billion, following a USD 4.4-billion loss in 2015.

In a separate press release, Cenovus also hailed the agreement, which it said would double its Canadian production and reserves.

“Combined, these assets have forecast 2017 production of approximately 298,000 barrels of oil equivalent per day,” Cenovus’ press release said.

“The acquisition is immediately accretive to key metrics, and, assuming the successful completion of a planned divestiture program, is expected to result in an 18% increase in 2018 adjusted funds flow per share compared with Cenovus’s original 2018 forecast.”