Source: ConocoPhillips and Hart Energy
[Editor's note: This is a developing story. Check back for updates.]
Houston’s ConocoPhillips (NYSE: COP) said March 29 that it would sell assets and interests in Canada for $13.3 billion in cash and equity, with proceeds earmarked for debt reduction and share repurchases.
The company said it signed a definitive agreement with Cenovus Energy Inc. (NYSE: CVE) to sell its 50% nonoperated interest in the Foster Creek Christina Lake (FCCL) oil sands partnership as well as the majority of its western Canada Deep Basin gas assets.
ConocoPhillips Canada will retain its operated 50% interest in the Surmont oil sands joint venture (JV) and its operated 100% Blueberry-Montney unconventional acreage position.
Total proceeds from the transaction consist of $10.6 billion cash and 208 million Cenovus shares valued at $2.7 billion as of March 28, ConocoPhillips said.
The company also will receive five years of uncapped contingent payments, triggered when Western Canada Select (WCS) crude prices exceed C$52 per barrel, about the same as US$25 per barrel of West Texas Intermediate.
Ryan Lance, ConocoPhillips chairman and CEO, said the transaction will make an immediate impact on the company’s value proposition by allowing it to reduce debt to $20 billion and double share repurchases to $6 billion from $3 billion.
“This means we will not only accelerate, but exceed, the three-year plan we laid out in November 2016,” Lance said. “The transaction is accretive to our cash margins and lowers the average cost of supply of our portfolio, with no impact to our estimate of cash provided by operating activities at $50 per barrel Brent price.”
The company also retains upside to future oil price increases through the Cenovus equity stake.
Estimated full-year 2017 production associated with the assets being sold is 280,000 barrels of oil equivalent per day (boe/d) net after royalty (NAR) made up of two-thirds liquids and one-third gas. Year-end 2016 reserves associated with the assets were 1.3 Bboe NAR.
Full-year estimated 2017 production and operating expenses associated with the assets is $400 million.
The company’s previously stated estimate of cash provided by operating activities of $6.5 billion at $50 per barrel Brent is unchanged, ConocoPhillips said.
The company said it does not expect any change to 2017 capex.
The disposed assets had a net book value of about $10.9 billion as of Dec. 31.
The transaction is subject to specific conditions precedent being satisfied, including regulatory review and approval. The company expects to record a gain on sale upon closing, which is expected in second-quarter 2017.
Darren Barbee can be reached at dbarbee@hartenergy.com.
Recommended Reading
Kissler: Wildcards That Could Impact Oil, Gas Prices in 2025
2024-11-26 - Geopolitics and weather top the list of trends that will determine the direction of oil and gas.
Adkins: The Overhang of Excess Oil May Not Be All that Massive
2024-12-02 - Raymond James’ J. Marshall Adkins says the market is factoring in perceptions of OPEC excess capacity from countries such as Venezuela, Nigeria and Iraq that have yet to hit their production potential—and probably won't anytime soon.
Paisie: Trump’s Impact on All Things Energy
2024-12-11 - President-elect Donald Trump’s policies are expected to benefit the U.S. oil and gas sector, but also bring economic and geopolitical risks.
Enverus: Haynesville Has 12.5 Years of Sub-$3 NatGas Inventory
2024-11-19 - Enverus forecasts that the time left to capitalize on the Haynesville's inventory will shorten by another two years when taking into account a boom in LNG demand.
Golar LNG Buys $90MM Stake in FLNG Hilli
2024-12-24 - Golar LNG has purchased Seatrium’s and Black & Veatch’s minority ownership in the asset, which represents 8% of FLNG Hilli’s full capacity.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.