Cenovus Energy will pay $75 million for Canexus rail-loading terminal
Cenovus Energy is putting its faith in the rail transportation side of its business, announcing it will buy Canexus Corp.’s crude-by-rail trans-loading facility northeast of Edmonton for $75 million. That’s a fraction of the $360 million it cost debt-laden Calgary based Canexus to build the facility.
As The Globe and Mail reports, lower crude prices have ebbed away at returns from shipping oil by train, but Cenovus is confident market conditions will improve, with capacity to expand its new Alberta facility when it does.
The Calgary-based oil company highlights how acquisition of the terminal from struggling Canexus Corp. also reduces its risk of having to compete for expensive rail terminal capacity during periods of pipeline congestion or potentially having production volumes stranded.
The facility, which is located roughly 50 kilometres northeast of Edmonton, can cope with about ten unit trains a week, which equates to around 70,000 barrels per day.
Reg Curren, a Cenovus spokesman, said: “It really gives us an opportunity to reach out into markets where we believe we’ll get higher prices for our production.”
Oil-by-rail shipments from Western Canada have tailed off significantly over the last six months, with Canadian exports of crude by train having come down 27% in the first quarter, compared with the final three months of last year.
But Cenovus believes it is now well positioned to adapt accordingly once exports of crude begin to recover.
“We believe a key benefit of acquiring this facility is the ability it provides to quickly and economically expand rail car loading capacity in response to changing market conditions,” Bob Pease, executive vice-president of markets, products and transportation, said in a statement.
He concluded by saying that the company expects rail to be an “important component” of its transportation strategy for “years to come”.
The deal is expected to be sealed on Aug. 31, subject to conditions.
Cenovus Energy Inc. is in the business of developing, producing and marketing crude oil, natural gas liquids (NGLs) and natural gas in Canada. The company has refining operations in the United States. It operates in four segments:
Oil Sands segment runs development and production of Cenovus’s bitumen assets at Foster Creek, Christina Lake and Narrows Lake. It also manages projects in the early-stages of development, including Grand Rapids and Telephone Lake, and Athabasca natural gas assets;
Conventional segment – development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, plus heavy oil assets at Pelican Lake;
Refining and Marketing segment, involved in the transporting, selling and refining crude oil into petroleum and chemical products,
Corporate and Eliminations segment.
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