ConocoPhillips to Sell Chunk of Canadian Oil-Sands Assets For $13.3 Billion
March 29 2017 - 5:33PM
Dow Jones News
By Maria Armental
ConocoPhillips is selling a large chunk of its Canadian
oil-sands assets to Cenovus Energy Inc. to pay down debt and
significantly increase stock buybacks, marking the latest exit from
the oil sands by non-Canadian player.
The $13.3 billion cash-and-stock deal would turn over to
Alberta-based Cenovus the majority of ConocoPhillips's western
Canada Deep Basin gas assets along with its joint stake in the
Foster Creek Christina Lake oil sands, in which Cenovus and
ConocoPhillips each own 50% and which Cenovus operates.
"This means we will not only accelerate, but exceed, the
three-year plan we laid out in November 2016, ConocoPhillips Chief
Executive Ryan Lance said Wednesday in a prepared statement.
The deal, which would double Cenovus's Canadian production and
reserves, is expected to close in the second quarter and is subject
to regulatory approval.
If approved, ConocoPhillips, one of the largest U.S. shale
producers, would still own a 50% stake in Canada's Surmont oil
sands, which it runs, and full ownership in the Blueberry-Montney
unconventional acreage position.
ConocoPhillips' daily net production from the oil sands totaled
183,000 barrels of crude oil equivalent, of which Foster Creek
accounted for 70,000 barrels a day, according to the company. The
remainder came from its stake in another Cenvous-run project called
Christina Lake, which made up 78,000 barrels a day of oil
equivalent, and its 35,000 barrel a day oil equivalent share of
Surmont. ConocoPhillips is the operator at Surmont, in which
France's Total SA owns a 50% stake
The Houston-based company plans to use the cash proceeds to cut
its debt burden to about $20 billion, from $27.28 billion as of
Dec. 31. It also plans to triple the amount allotted for stock
buybacks this year to $3 billion and double the overall amount set
aside to buy back stock through 2019 to $6 billion.
Cenovus also agreed to make extra payments to Conoco if the
price of oil rises above a certain threshold.
Canada's oil sands have been losing out to cheaper U.S. shale
oil as the energy industry's supplier of choice for higher cost
barrels of oil. Royal Dutch Shell is selling nearly all of its
Canadian oil-sands developments, while Norway's Statoil ASA exited
its Canadian oil-sands operations last year.
ConocoPhillips shares, up 16% over the past 12 months, rose 6%
to $48.90 in after-hours trading while Cenovus's stock fell 7.49%
to $12.10.
--Chester Dawson contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
March 29, 2017 18:18 ET (22:18 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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