Cenovus reaches agreement to sell Pipestone business for $625 million
10 August 2018 - 7:01AM
Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) and one of its
subsidiaries have entered into an agreement to sell the general
partnership that holds the Pipestone and Wembley natural gas and
liquids business in northwestern Alberta (the “Pipestone Business”)
for cash proceeds of $625 million. The transaction also includes
the Pipestone Business’s 39% operated working interest in the
Wembley gas plant. The sale is expected to close in the third
quarter of 2018, subject to customary closing conditions.
“I’m pleased with this important step towards streamlining and
rationalizing our acreage in the Deep Basin,” said Alex Pourbaix,
President & Chief Executive Officer. “These are high quality
assets and we believe the Pipestone transaction will provide
compelling value for Cenovus shareholders.”
As with previous divestitures, proceeds from this sale will be
used to further deleverage the company’s balance sheet.
Cenovus is in various stages of evaluating and marketing other
non-core Deep Basin assets for potential divestment. The company is
encouraged by the high level of interest it has seen in these
processes but remains resolute that all asset dispositions are
contingent upon receiving fair value for the company’s
shareholders.
TD Securities Inc. acted as exclusive financial advisor to
Cenovus on this transaction.
Transaction summary |
Gross
proceeds ($ million)1 |
625 |
Year-to-date average production (BOE/d)2 |
~8,800 |
Natural
gas (%) |
55 |
Year-to-date operating margin ($ millions) 1,3 |
~22 |
Price per
flowing barrel ($ per BOE/d)1 |
~71,000 |
1 All dollar amounts are in Canadian currency unless otherwise
specified. 2 Based on average production for the period January 1,
2018 to June 30, 2018. 3 Year-to-date as of June 30, 2018.
Operating margin is an additional subtotal found in Note 1 of
Cenovus’s Interim Consolidated Financial Statements (unaudited) for
the period ended June 30, 2018 (available on SEDAR at sedar.com, on
EDGAR at sec.gov and Cenovus's website at cenovus.com).
ADVISORY Oil and Gas
InformationBarrels of Oil Equivalent – Natural gas volumes
have been converted to barrels of oil equivalent (BOE) on the basis
of six thousand cubic feet (Mcf) to one barrel (bbl). BOE may be
misleading, particularly if used in isolation. A conversion ratio
of one bbl to six Mcf is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent value equivalency at the wellhead. Given that the value
ratio based on the current price of crude oil compared with natural
gas is significantly different from the energy equivalency
conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is
not an accurate reflection of value.
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.
Forward-looking information in this news release is identified
by words such as “believe”, “expect”, “will” or similar expressions
and includes suggestions of future outcomes, including statements
about: expected timeline for closing of the transaction; the
company's divestiture plans and strategy; expected impacts of the
transaction to Cenovus, including value for shareholders; expected
use of proceeds from the transaction to further deleverage the
company’s balance sheet.
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: assumptions identified in Cenovus's 2018
guidance (dated December 13, 2017) (available at cenovus.com);
successful closing of the transaction, including obtaining
necessary regulatory and partner approvals and satisfaction of all
other conditions to closing and within expected timelines; and
successful application of asset sale proceeds to further deleverage
the company’s balance sheet in the manner as intended. 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, 2017 and in the updates in the “Risk Management and Risk
Factors” section of Cenovus’s MD&A for the period ended June
30, 2018.
Cenovus Energy Inc.Cenovus Energy Inc. is a
Canadian integrated oil and natural gas company. It is committed to
maximizing value by responsibly developing its assets in a safe,
innovative and efficient way. 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.
Find Cenovus on Facebook, Twitter, LinkedIn, YouTube and
Instagram.
CENOVUS
CONTACTS:Investor RelationsKam
SandharSenior Vice-PresidentStrategy & Corporate Development
403-766-5883 Mark AustinSenior Advisor, Investor
Relations403-766-3926 Investor Relations general
line403-766-7711 |
Media
RelationsReg CurrenSenior Advisor, Media
Relations403-766-2004 Media Relations general
line403-766-7751 |
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