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.
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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