Cenovus reaches agreement to accelerate development of its Marten Hills oil assets
November 09 2020 - 7:30AM
Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE), through a wholly owned
partnership, has entered into a definitive agreement to sell its
Marten Hills oil assets in northern Alberta to Headwater
Exploration Inc. for initial cash and common share equity
consideration of approximately $100 million.
Total consideration paid to Cenovus consists of $35 million in
cash and 50 million common shares of Headwater, plus 15 million
share purchase warrants. Each warrant will entitle the holder to
acquire one Headwater common share for a period of three years
following the completion of the transaction at an exercise price of
$2 per share. Upon closing, Kam Sandhar, Senior Vice-President,
Conventional and Sarah Walters, Senior Vice-President, Corporate
Services will represent Cenovus on the Board of Directors of
Headwater. In addition to the initial consideration, Headwater has
agreed to a Gross Overriding Royalty (GORR) agreement that gives
Cenovus the opportunity to benefit from future development of the
Clearwater formation at Marten Hills. Headwater has committed to
spending at least $100 million on the acquired lands by the end of
2022. The sale is expected to close on or about December 22, 2020,
subject to customary closing conditions.
“This is a unique opportunity for us to partner with a
well-capitalized and highly respected management team to accelerate
development at Marten Hills,” said Alex Pourbaix, Cenovus President
& Chief Executive Officer. “These are high-quality assets that
were unlikely to receive near-term funding from Cenovus, and we
believe this transaction will provide compelling value for Cenovus
shareholders over the long term.”
From its initial investment at Marten Hills, Cenovus always kept
open the option to either continue developing or divest the asset.
Cenovus determined this divestiture was a unique opportunity to
accelerate value generated from the Marten Hills assets,
particularly in the context of the deferral of exploration and
development spending as part of the company’s response to lower oil
prices resulting from the COVID-19 pandemic.
ADVISORY
Basis of PresentationAll financial figures and
information have been prepared in Canadian dollars (which includes
references to "dollars" and "$"), except where another currency has
been indicated, and in accordance with International Financial
Reporting Standards ("IFRS" or "GAAP") as issued by the
International Accounting Standards Board. Production volumes are
presented on a before royalties basis.
Note Regarding Forward-looking InformationThis
news release contains certain forward-looking statements and
forward-looking information (collectively referred to as
“forward-looking information”) within the meaning of applicable
securities legislation, including the United States Private
Securities Litigation Reform Act of 1995, about our current
expectations, estimates and projections about the future, based on
certain assumptions made by us in light of our experience and
perception of historical trends. Although Cenovus believes that the
expectations represented by such forward-looking information are
reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned not to place undue
reliance on forward-looking information as actual results may
differ materially from those expressed or implied. Cenovus
undertakes no obligation to update or revise any forward-looking
information except as required by law.
This forward-looking information is identified by words such as
“believe”, “expected”, “opportunity”, “will”, or similar
expressions and includes suggestions of future outcomes, including
statements about: the appointment of Cenovus executives to the
Board of Headwater, accelerating value from the Marten Hills
assets, the timing of closing of the sale, and the creation of
value for Cenovus shareholders from the sale over the long
term.
Developing forward-looking information involves reliance on a
number of assumptions and consideration of certain risks and
uncertainties, some of which are specific to Cenovus and others
that apply to the industry generally. Material factors or
assumptions on which the forward-looking information in this news
release is based include: successful closing of the transaction,
including obtaining necessary regulatory and partner approvals, and
satisfaction of all other conditions to closing and within expected
timelines.
Additional information about risks, assumptions, uncertainties
and other factors that could cause Cenovus's actual results to
differ materially from those expressed or implied by its
forward-looking statements is contained under “Risk Management and
Risk Factors” in Cenovus's Annual MD&A or Form 40-F for the
year ended December 31, 2019 and in the updates in the “Risk
Management and Risk Factors” section of Cenovus’s MD&A for the
period ended September 30, 2020.
Cenovus Energy Inc.Cenovus Energy Inc. is a
Canadian integrated oil and natural gas company. It is committed to
maximizing value by sustainably developing its assets in a safe,
innovative and cost-efficient manner, integrating environmental,
social and governance considerations into its business plans.
Operations include oil sands projects in northern Alberta, which
use specialized methods to drill and pump the oil to the surface,
and established natural gas and oil production in Alberta and
British Columbia. The company also has 50% ownership in two U.S.
refineries. Cenovus shares trade under the symbol CVE and are
listed on the Toronto and New York stock exchanges. For more
information, visit cenovus.com.
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CENOVUS
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