CALGARY, Alberta, Sept. 25, 2017 (GLOBE NEWSWIRE) — Cenovus Energy Inc. (TSX:CVE) (NYSE:CVE) has entered into a definitive agreement to sell its Suffield crude oil and natural gas operations in southern Alberta to International Petroleum Corporation for gross cash proceeds of $512 million. The parties have also agreed to a deferred purchase price adjustment that gives Cenovus the opportunity to benefit from potential additional payments of up to $36 million. The sale of the Suffield assets, which include Cenovus’s properties on Canadian Forces Base Suffield and the adjacent Alderson property, is expected to close in the fourth quarter, subject to closing conditions.
Net proceeds from the Suffield sale, and those from the sale of Cenovus’s Greater Pelican Lake assets announced on September 5, 2017, will be applied to reduce the company’s $3.6 billion asset-sale bridge facility. Cenovus remains focused on reaching its target of being below two times net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
The deferred purchase price adjustment is a two-year commitment that begins on January 1, 2018. Under the terms of the agreement, International Petroleum will make payments to Cenovus for each month in which the average daily price of West Texas Intermediate (WTI) is above US$55 per barrel (bbl) or the price of Henry Hub natural gas is above US$3.50 per million British thermal units (MMBtu). Deferred purchase price adjustment payments are capped for each commodity, with a maximum combined payment of $36 million.
“We’re right on target with the financial plan we put in place to deleverage our balance sheet following our recent transformational acquisition of assets in Western Canada,” said Brian Ferguson, President & Chief Executive Officer. “The successful execution of our planned divestiture program this year will further focus our asset base and should leave us well positioned to drive additional shareholder value from our core assets in the oil sands and Deep Basin.”
The sale processes for Cenovus’s Palliser assets in southern Alberta and the Weyburn carbon-dioxide enhanced oil recovery operation in Saskatchewan are proceeding as expected. Cenovus anticipates reaching sale agreements for these two assets in the fourth quarter of 2017.
BMO Capital Markets acted as financial advisor to Cenovus for the Suffield transaction.
|Gross proceeds ($ millions)1||512|
|Deferred purchase price adjustment ($ millions)1,2||36|
|Current production (BOE/d)||23,700|
|Percent natural gas||72|
|Operating margin ($ millions) 1,3||62|
|Price per flowing barrel ($ per BOE/d) 1||21,600|
|1 All dollar amounts are in Canadian currency unless otherwise specified.
2 Maximum potential payment under the terms of the deferred purchase price adjustment agreement.
3 Year-to-date as of June 30, 2017. Operating margin is an additional subtotal. For more information, refer to the Non-GAAP Measures and Additional Subtotal section of the Advisory below.