COP ConocoPhillips

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)

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