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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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.

 

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.

 

Cenovus Energy Inks $75m Deal For Alberta Rail-Loading Terminal

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.

Cenovus Energy Canexus rail-loading terminal

Cenovus Energy will pay $75 million for Canexus rail-loading terminal

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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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.

Michael Sprung Says These Canadian Smallcaps are Poised to Outperform

The Small Cap Power Expert Interview featuring Michael Sprung.

SmallCapPower: Welcome, Michael. For the benefit of new viewers, can you give us a brief description of your company, as well as your role there?

Michael: I founded the company 10 years ago. Our clients are primarily high net worth or private clients, some corporate, but mainly family trusts, foundations, endowments, and personal accounts.

SmallCapPower: North American markets have been in positive territory for some time now. Do you have any concerns going forward?

Michael: Well, yes. Generally speaking, North American markets have been pretty positive since the financial crisis in ’08, ’09. In that period, we’ve seen a lot of dynamics around the world changing to some extent. We’ve seen China become more of an economic powerhouse where their growth, although it is slowing, is still a very enviable rate of growth relative to the developed economies. We’ve seen Europe continue to struggle with their problems, primarily dealing with the debts of countries like Greece and Spain and Portugal and so on. In that time, the U.S. economy has been relatively strong and actually it has performed relatively well compared with the rest.

Michael Sprung North American markets positive since financial crisis 2008 2009

Michael Sprung – generally speaking, North American markets have been pretty positive since the financial crisis in ’08, ’09.

It’s been helped by their so-called Quantitative Easing, which has now been pulled back a little bit as the economy has gotten stronger. But at the same time, we see Europe now going into that program in a heavier way. Then all of a sudden we’ve seen the oil price suddenly collapse. That has really caused some concern amongst oil exporters, not only in Canada, but countries like Russia and Venezuela as well. So recently, what are we beginning to see? The world has built up a mountain of debt, some $57 trillion over that period of time to the middle of last year, even greater today.

The bond market is beginning to retaliate. They’re beginning to ask for higher rates of return ahead of what the central banks appear ready to give them given that the economies still appear quite fragile in many areas. So this conflict, I think, is going to continue to have higher volatility in the markets. I think this could be a real blow to Canada with the debt situation that our consumers are in. So I think one has to be very careful and very choosy about the investments they look at in today’s market.

SmallCapPower: We’ve seen some recent positive direction in oil prices. What are your thoughts on investing in this sector?

Michael: I feel that it’s still a very uncertain period for oil. We just saw Goldman Sachs come out recently with a report saying that oil, over the next five years, is going to go to $55 and stay in that area for quite some time. That would be quite disadvantageous to a number of the new technologies which have been used to get oil out of the ground in North America, not only in our oil sands but also to some extent the fracking mechanisms that have made the U.S. more oil independent over the last number of years, but still their marginal cost of production tends to be around that level or higher. So I think that investors in oil today have to take a very long term view.

Oil is a cyclical industry. We have seen these cycles before. So you want to pick the companies that are going to survive, and not only survive, but possibly prosper as a result of weaker companies finding themselves in more trouble. So you’re looking for companies that have strong balance sheets, good management of gain, companies such as Suncor Energy Inc. (TSX: SU), Canadian Natural Resources Limited (TSX: CNQ), even companies like Cenovus Energy Inc. (TSX: CVE), which had been very proactive in cutting back capital expenditures going forward. Companies like Vermilion Energy Inc. (TSX: VET), which have more international operations or companies like ARC Resources Ltd. (TSX: ARX) that are just well-managed. In the smaller areas, you want to pick those companies that are very well-managed, companies like Bonavista Energy Corporation (TSX: BNP) and so on.

SmallCapPower: Aside from the energy sector, what do you think will affect Canadian markets?

Michael: I think we have a few unknowns in the Canadian markets, particularly with the recent election of an NDP government in Alberta. I don’t think anybody really knows what the consequences of that are going to play out to be. But generally speaking, I don’t think that business is looking for an overly positive environment to come out of that. At the same time, we still have a Liberal government in Ontario. Ontario has found itself in a great deal of debt over the last 10 years since the Liberals have been in power and our hydro rates have gone up significantly.

Our labour rates are relatively high and so as a base for manufacturing we are finding it harder and harder to compete. So with higher taxes, higher labour cost and so on, and now the prospect of a federal election, which again, could change from a more business-friendly government to one that may be less so, I think that there are some uncertainties in Canada. So again, you want to invest in firms that are going to be well-positioned to go through a period where maybe the environment is not quite as robust as it has been.

SmallCapPower: Can you mention some examples of where you might look to invest today?

Michael: Sure. I think there’s a few areas in companies that we see positioning themselves rather well to compete not only in the Canadian market, but also in Canada and the U.S. and in some cases even beyond that. One of them would be AGT Food and Ingredients Inc. (TSX: AGT). That’s a company that we have been invested in for some time. They’re one of the leaders in pulses, pulses which included things like lentils, chickpeas, beans, canary seeds, and so on, as well as some pasta and rice.

That company, over the last number of years, has transformed itself from not just a provider of these pulses, but a manufacturer of ingredients from those pulses. There is growing demand globally for these kinds of products. As a matter of fact, next year, the United Nations has called 2016 the Year of the Pulses. So that should give them the company some further benefit as well as that becomes better known. As one of the leaders, they have been expanding capacity. We expect that their earnings can go up fairly significantly over the next number of years.

So for a company with a market capitalization that’s currently around $670 million, we think that it can prosper in this sort of environment. Another company that we might look to would be New Flyer Industries (TSX: NFI), which is North America’s largest manufacturer of heavy-duty transit buses. It has operations both in the U.S. and Canada. Just recently, as a sign of confidence, management has slightly increased their dividend. Here we’re dealing with a company with a market capitalization of around $850 million that is expanding not only in the manufacture of buses, but also in aftermarket parts and services.

There are fewer and fewer competitors in this industry. As I was saying earlier with the U.S. economy doing better, a number of users of buses, whether they’re municipalities or other transport companies that utilize buses, are getting into a better position to buy more buses. So again, we would be looking there. Maybe thirdly, another company that we would be looking at would be HudBay Minerals Inc. (TSX: HBM). HudBay has got operations primarily in copper and zinc through Canada, Peru, and some exposures in Arizona as well.

But besides making improvements at their current mines, the big story with them of course, is they have this Constancia mine in Peru, which has just come on stream and it has just achieved commercial production. So that’s going to really increase their production profile over the next few years. After that, we will see perhaps Rosemont coming on stream, which will then increase their production profile. So when we’re looking for mining companies, particularly cyclical, we’re looking for those that have got a good strong growth in production that are efficiently managed.

A few years back, it was questionable whether HudBay would have the wherewithal to finance and get Constancia going. They have done that, so we’re past that. We’re going to see capital expenditures perhaps drop down a little bit and the company should prosper as a result. Again though, you’re playing the commodity cycle with a company like HudBay just as you are buying oil company in the oil market. So one has to be wary of the cycle and the fact that profitability comes and goes along with the commodity cycle too.

SmallCapPower: Thanks for taking the time for today’s interview, Michael.

Michael: Thank you.

View the interview on the SmallCapPower site here>>

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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.

 

    Canada Stockwatch – Cenovus Initiates Move To Sell Canadian Royalty Lands

    Canada Stockwatch – Cenovus Energy Inc. (TSE:CVE, Mkt cap 19.24B, P/E 23.80, Div/yield 0.27/4.56, EPS 0.98, Shares 824.51M) is exploring the possibility of selling its royalty lands in Western Canada, hiring Toronto-Dominion Bank to advise on the process.

    Canada Stockwatch - Cenovus selling royalty lands Western Canada

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

    As Bloomberg reports, the Calgary-based firm may also go down the route of an initial public offering as it looks to monetize the royalty lands, located across Alberta, Saskatchewan and Manitoba.

    Brett Harris, a spokesman for Cenovus, confirmed the move in an interview, with the energy company said to be seeking ways to offset the dramatic drop in oil prices. The decision comes only a couple months after a $1.5 billion share sale, initiated back in February.

    The moves bears similarities to Encana Corp.‘s attempts to raise funds last May, in which it managed to accrue $1.46 billion in the initial public offering of PrairieSky Royalty Ltd. That was followed by a secondary offering of PrairieSky’s shares last September, raising a further $2.6 billion.

    Cenovus, which split from Encana in 2009, boasts 3.1 million net acres of royalty lands, capable of producing the equivalent of 7,600 barrels a day. The properties netted the company $150 million in pre-tax operating cash flow, according to Shailender Randhawa, a Calgary-based analyst with RBC Capital Markets.

    The value of the properties is somewhere between $1.5 billion and $1.6 billion, according to Randhawa’s estimates. He anticipates that other royalty companies like PrairieSky and Freehold Royalties Ltd. would be first in line to bid, whilst suggesting that mining royalty firm Franco-Nevada Corp. could also play a part.

    Royalty companies operate by collecting payments from other energy companies that drill on their land, thus positioning themselves as attractive to investors because they are sheltered somewhat from crude prices.

    Canada Stockwatch – in February Cenovus sold 67.5 million common shares to a group of underwriters for $22.25 each. The company says it will use the $1.5-billion proceeds to fund its plans to invest $1.8 billion to $2.0 billion in its oil sands projects and other operations in 2015.

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    We believe that clients should be fully aware of all fees associated with their investments.

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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.