Cenovus Energy Inc (TSE:CVE) makes progress on acquisition financing

Canadian oil company Cenovus Energy Inc (TSE:CVE, Mkt cap 15.38B, Div/yield 0.05/1.35, EPS -0.65, Shares 1.02B) is making good progress executing on the financing plan for its $17.7bn purchase of assets in Western Canada, the company said on Thursday.

Cenovus announced on March 29, 2017, that it had agreed to acquire ConocoPhillips' 50% interest in the FCCL Partnership, the two companies' jointly owned oil sands venture which is operated by Cenovus. Additionally, Cenovus will purchase the majority of ConocoPhillips' Deep Basin conventional assets in Alberta and British Columbia.

Cenovus Energy Christina Lake

Cenovus Energy Inc (TSE:CVE) makes progress on acquisition financing

Together, these assets have forecast 2017 production of approximately 298,000 barrels of oil equivalent per day (BOE/d). The acquisition will double Cenovus's production and reserves in Canada.

The total agreed consideration is $17.7bn, including $14.1bn in cash and 208 million common shares in Cenovus.

Since the acquisition agreement was announced, Cenovus has successfully completed a $3.0bn bought-deal common share financing and priced a US$2.9 billion offering of senior notes. The company also intends to use a portion of its existing cash on hand and available credit facility capacity as well as committed bridge loans to help finance the acquisition.

"I'm extremely pleased with the milestones we've achieved to date," commented Brian Ferguson, Cenovus president and CEO. "We're doing what we said we'd do. And as we move forward with our plan to complete this acquisition, we'll remain focused on preserving our financial resilience, strengthening our balance sheet and maintaining our investment grade credit ratings."

As part of its plan to deleverage and strengthen its balance sheet, Cenovus is looking to sell its legacy conventional oil and natural gas assets at Pelican Lake and Suffield. Further assets will also be divested as required.

Asset sale proceeds and free funds flow are expected to be applied against the company's asset-sale bridge loan and draws on its existing credit facility.

Over the long term, Cenovus said that it will continue to target a debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of 1.0 to 2.0 times and debt to capitalization of 30% to 40%.

The acquisition is expected to close in the second quarter of this year. After completion, Cenovus anticipates having approximately $4bn in remaining liquidity, including $1bn in cash on hand and $3bn in unused capacity on its committed credit facility.

Cenovus Energy Inc (TSE:CVE) is a Calgary, Alberta based oil company. Cenovus in the business of developing, producing and marketing crude oil, natural gas liquids (NGLs) and natural gas in Canada with refining operations in the United States. It operates four business segments: Oil Sands segment, engaged in the development and production of Cenovus’s bitumen assets at Foster Creek, Christina Lake and Narrows Lake, as well as projects in the early-stages of development, such as Grand Rapids and Telephone Lake, and Athabasca natural gas assets; Conventional segment, engaged in the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake; Refining and Marketing segment, engaged in the transporting, selling and refining crude oil into petroleum and chemical products, and Corporate and Eliminations segment.

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Cenovus Energy (TSE:CVE) to revive work on Christina Lake oil sands expansion

Canadian oil producer Cenovus Energy Inc (TSE:CVE, Mkt cap 17.73B, Div/yield 0.05/0.95, EPS -1.53, Shares 833.29M) is to resume work at an oil sands project that was shelved two years ago due to declining oil prices.

Cenovus Energy TSE:CVE revive Christina Lake oil sands expansion

Cenovus Energy (TSE:CVE) to revive work on Christina Lake oil sands expansion

The Calgary-based company announced on Thursday that it plans to restart construction on the phase G expansion at Christina Lake in northeast Alberta in the first half of 2017.

Since the project was deferred in late 2014, Cenovus has reworked the construction plan and rebid contracts, reducing the capital cost by more than $500m. The company said it anticipates that the expansion can be completed with go-forward capital investment of between $16,000 and $18,000 per flowing barrel.

The Christina Lake expansion is currently about 20% complete and has an approved design capacity of 50,000 barrels per day (bbls/d) gross. First oil from the expansion is expected in the second half of 2019.

Cenovus’s overall 2017 budget reveals that the company plans to invest a total of between $1.2bn and $1.4bn over the course of the year. That’s a 24% increase compared with its forecast capital spending for 2016.

The company intends to increase its total oil production in 2017 by 14% compared with its forecast average production for 2016.

As well as Christina Lake, the budget includes capital to invest in a targeted drilling program on the Palliser Block in southern Alberta. To date, the company has identified approximately 700 drilling locations with high-return potential. Cenovus plans to spend approximately $160m in 2017 to drill about 50 horizontal development wells and 60 stratigraphic wells at Palliser.

“We intend to pursue some exciting opportunities on the Palliser Block to generate short-cycle cash flow to support continued growth in our oil sands assets, which is consistent with our long-standing conventional strategy,” explained Cenovus president and CEO Brian Ferguson. “Our investment plans for Palliser and Christina Lake phase G far exceed our internal rate of return threshold.”

Cenovus Energy Inc (TSE:CVE) is a Calgary, Alberta based oil company. Cenovus in the business of developing, producing and marketing crude oil, natural gas liquids (NGLs) and natural gas in Canada with refining operations in the United States. It operates four business segments: Oil Sands segment, engaged in the development and production of Cenovus’s bitumen assets at Foster Creek, Christina Lake and Narrows Lake, as well as projects in the early-stages of development, such as Grand Rapids and Telephone Lake, and Athabasca natural gas assets; Conventional segment, engaged in the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake; Refining and Marketing segment, engaged in the transporting, selling and refining crude oil into petroleum and chemical products, and Corporate and Eliminations segment.

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Bigger-than-expected quarterly loss forces Cenovus to make further cuts

Oil producer Cenovus Energy Inc (TSE:CVE, Mkt cap 12.57B, P/E 19.77, Div/yield 0.05/1.38, EPS 0.73, Shares 833.19M) said capital discipline and balance sheet strength will remain its top priorities after posting a bigger-than-expected quarterly loss, the Financial Post reports.

Cenovus Energy

Cenovus Energy said capital discipline and balance sheet strength will remain its top priorities

Cenovus’s net loss widened to $641 million, or 77 cents per share, in the fourth quarter ended Dec. 31, from $472 million, or 62 cents per share, a year earlier.

Operating loss, which excludes most one-time items, fell by more than a quarter to $438 million, or 53 Canadian cents per share.

Analysts on average were expecting a loss of 20 Canadian cents per share, according to Thomson Reuters I/B/E/S.

In attempt to shore up finances, the Canadian company announced a fresh round of cuts to its quarterly dividend, 2016 capital budget and workforce.

The “extremely challenging oil price environment” has seen Cenovus strive to cut costs in the last 18 months and it has now said it will lower spending at its Foster Creek and Christina Lake oil sands projects in Alberta in order to see off incessantly falling prices.

While Alberta’s vast oil sand deposits are the world’s third-largest crude reserves, they are more expensive to operate in than conventional oil fields.

The cut in 2016 capital spending by $200-$300 million to $1.2-$1.3 billion is the second time Cenovus has had to adjust its budget, while it also plans to reduce spending on its emerging oil sands assets and its conventional oil business.

The firm was quick to add, however, that the latest capital spending reductions would have “minimal impact” on its oil sands production, and saw no reason to alter its initial forecast of 144,000-157,000 barrels per day on a net basis.

Cenovus, which sold its oil and gas royalty properties to Ontario Teachers’ Pension Plan for about $3.3 billion last year, confirmed plans to further reduce its workforce, although it wouldn’t be drawn on an exact figure.

It also said it would cut its current-quarter dividend by 69% to 5 Canadian cents per share.

Cenovus Energy Inc. is a Calgary, Alberta based oil company. Cenovus in the business of developing, producing and marketing crude oil, natural gas liquids (NGLs) and natural gas in Canada with refining operations in the United States. It operates four business segments: Oil Sands segment, engaged in the development and production of Cenovus’s bitumen assets at Foster Creek, Christina Lake and Narrows Lake, as well as projects in the early-stages of development, such as Grand Rapids and Telephone Lake, and Athabasca natural gas assets; Conventional segment, engaged in the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake; Refining and Marketing segment, engaged in the transporting, selling and refining crude oil into petroleum and chemical products, and Corporate and Eliminations segment.

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Cenovus Energy expands staff reduction project

Cenovus Energy Inc (TSE:CVE, Mkt cap 17.07B, P/E – , Div/yield 0.16/3.15, EPS -0.86, Shares 833.19M) has said it now plans to lay off 540 employees, having announced at the end of July that the figure would be somewhere in the region of 400, the Calgary Herald reports.

Staff will discover their fate in the next few weeks, company spokesman Brett Harris confirmed to the newspaper.

Cenovus Energy staff reduction

Cenovus Energy expands staff reduction project

“People know what the (540) numbers are but they don’t know individually,” said Harris.

“Obviously, it’s a terrible, terrible time for everybody and not easy decisions to make but, when your cash flow is significantly reduced, you have to make responsible decisions.”

Harris also revealed that an as-yet-undetermined number of field-based employees will also be laid off next year, as the company attempts to offset lower benchmark U.S. oil prices.

Talk of job cuts will unlikely come as a surprise to employees, given that the Calgary-based firm had made it public in February that it would cut 800 positions.

Harris highlighted the scale of the downsizing project: from the end of 2014 to the end of 2015, the firm will have carried out a 24% reduction in its overall workforce.

“So we will go from approximately 5,200 at the end of last year to approximately 3,900 at the end of this year,” he added.

The integrated oil company was estimated to save $100 million in 2016 by carrying out its planned 400 job cuts – rising to $135 million for 540 employees next year, using the same formula.

Drilling activity has been halved in Canada and the United States, prompting thousands of job cuts at producer and oilfield services companies. Harris’ latest comments suggest that more job cuts can be expected, as firms prepare for the winter drilling season.

Cenovus Energy Inc. is a Calgary, Alberta based oil company. Cenovus in the business of developing, producing and marketing crude oil, natural gas liquids (NGLs) and natural gas in Canada with refining operations in the United States. It operates four business segments: Oil Sands segment, engaged in the development and production of Cenovus’s bitumen assets at Foster Creek, Christina Lake and Narrows Lake, as well as projects in the early-stages of development, such as Grand Rapids and Telephone Lake, and Athabasca natural gas assets; Conventional segment, engaged in the development and production of conventional crude oil, NGLs and natural gas in Alberta and Saskatchewan, including the heavy oil assets at Pelican Lake; Refining and Marketing segment, engaged in the transporting, selling and refining crude oil into petroleum and chemical products, and Corporate and Eliminations segment.

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Cenovus Energy Confirms Asset-Sale Talks With Unnamed Party

Cenovus Energy Inc (TSE:CVE, Mkt cap 17.42B, P/E – , Div/yield 0.27/5.06, EPS -0.20, Shares 828.44M) has confirmed that it has entered into talks with a potential buyer of its royalty lands in Western Canada.

Canada Stockwatch - Cenovus selling royalty lands Western Canada

Canada Stockwatch – Cenovus is exploring the possibility of selling its royalty lands in Western Canada.

As CTV news reports, the Calgary-based firm was forced into speaking out late last week after Reuters reported that that it was some way down the line in doing a deal with the Ontario Teachers Pension Plan.

However, Cenovus would not be drawn on the other party’s identity, nor the estimated value of the deal, which is rumoured to be worth between $2.5 billion and $3 billion.

The integrated oil company was also quick to caveat the announcement by saying that there is no certainty that a deal will be done with the unnamed party.

Cenovus added, though, that it is starting to come good on its pledge to find ways to maximize the value of its lands – before drawing the announcement to a close.

“Until such time as it is appropriate to make a public announcement about a transaction, Cenovus does not intend to comment further on this matter,” Cenovus said.

A spokesman for fund manager Ontario Teachers, meanwhile, said it had no comment on the report, after being pressed about whether talks were at an “advanced stage,” as suggested.

If the reported value of the deal is close to the mark, it would make it around $500 million higher than many analysts’ estimates, although it is thought the company would be required to sell some of its own production from the royalty lands if it is to achieve such a figure.

In April, Cenovus said that if market conditions remained relatively unchanged, it expected its cash flow would “essentially cover” its capital spending and maintain its dividend for the rest of the year. The firm recently announced it will pay a second-quarter dividend of 26.62 cents per share on June 30.

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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The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.