ConocoPhillips to Sell Portion of Canadian Oil-Sands Assets For $13.3 Billion -- Update
March 29 2017 - 8:50PM
Dow Jones News
By Maria Armental
ConocoPhillips is selling a large portion 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 a 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 stake in the Foster
Creek Christina Lake oil sands, in which Cenovus and ConocoPhillips
each own 50% and that Cenovus operates.
The deal, Chief Executive Ryan Lance said in a conference call,
would "supercharge" the company's three-year financial plan laid
out in November, exceeding targets in less than a year, and
boosting planned dispositions to more than $16 billion.
ConocoPhillips had initially targeted $5 billion to $8 billion.
That leaves the company with "the same priorities as November,
except bigger and faster," said Alan Hirshberg, executive vice
president for production, drilling and projects.
As part of the deal, the Houston energy company would take an
equity stake in Cenovus of 208 million shares, which ConocoPhillips
officials said they intend to sell after a 6 month lockup
period.
"We are drillers, we are not natural equity investors," Chief
Financial Officer Don Wallette said Wednesday.
Cenovus also agreed to make additional payments to
ConocoPhillips if the price of oil rises above a certain
threshold.
The deal, which is expected to close in the second quarter and
is subject to regulatory approval, would double Cenovus's Canadian
production and reserves.
But rating firms DBRS and S&P Global Ratings on Wednesday
warned the deal could result in a downgrade for Cenovus.
If the sale goes through, ConocoPhillips, one of the largest
U.S. shale producers, would still keep a presence in Canada with a
50% stake in the Surmont oil sands-project, which it runs and where
it targets a 50% production increase, and full ownership in the
Blueberry-Montney unconventional acreage position.
ConocoPhillips plans to use the cash proceeds to cut debt to
about $20 billion this year and about $15 billion by 2019. As of
Dec. 31., ConocoPhillips's debt stood at more than $27 billion,
according to a regulatory filing.
ConocoPhillips 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.
Canada's oil sands, which have fueled Canada's growth, have been
losing out to cheaper U.S. shale oil.
Western Canadian heavy crude costs more to extract because it
must be separated from deposits of sand and trades at a discount,
in part because of the distance it must be transported from remote
boreal forests in Alberta.
Norway's Statoil ASA exited its Canadian oil-sands operations
last year, and Royal Dutch Shell said this month it would sell
nearly all of its oil-sands developments.
ConocoPhillips shares, up 16% over the past 12 months, rose 6%
to $48.55 in after-hours trading while Cenovus's stock fell 8% to
$12.
--Chester Dawson and Lynn Cook contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
March 29, 2017 20:35 ET (00:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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