Cenovus to sell WRB Refining interest to Phillips 66 for $1.4bn

Cenovus Energy announced on September 9 that it had agreed to sell its 50% interest in the WRB Refining to its existing partner in the joint venture, Phillips 66. The sale will be conducted indirectly through wholly owned subsidiaries of Cenovus for a purchase price of CAD1.9bn ($1.4bn) in cash.

The WRB joint venture includes the Wood River Refinery in Illinois and the Borger Refinery in Texas. According to the announcement, these two facilities have a combined crude throughput capacity of 495,000 barrels per day (bpd), or 247,500 bpd net to Cenovus. The company went on to say that after it closes the sale of its WRB stake, its downstream business will comprise the Lloydminster upgrader, Lloydminster refinery, Lima refinery, Toledo refinery and Superior refinery. At this point, the crude throughput capacity of Cenovus’ downstream business will total 472,800 bpd, with heavy oil throughput capacity accounting for around 55%.

Cenovus said it would use the proceeds from the sale to reduce debt and to accelerate returns to shareholders via increased share repurchases. It noted that in the third quarter, up to the end of August, it had bought back roughly 18.8mn of its common shares for CAD388mn ($280mn), at an average price of roughly CAD20.59 ($14.83) per share.

The sale also comes as Cenovus prepares to acquire MEG Energy for around CAD7.9bn ($5.7bn) including debt. However, that transaction still needs to be approved by two-thirds of MEG’s shareholders and faces opposition from rival bidder Strathcona Resources.

Cenovus expects the WRB sale to be completed around the end of the third quarter of this year, even though Phillips 66 said in its own announcement that it expected the transaction to close in the fourth quarter.

“This transaction aligns with our strategy of owning and operating the assets that are core to our business,” stated Cenovus’ president and CEO, Jon McKenzie. “After the sale of WRB, our downstream business will be more focused, comprised of assets we control, which provide physical integration and egress for our leading upstream heavy oil business,” he added.

Phillips 66’s chairman and CEO, Mark Lashier, meanwhile, described the transaction as a move to strengthen his company’s integrated business and expand its position in a region where it leads the industry.

“This acquisition is expected to deliver operational and commercial synergies of approximately $50mn per year by enabling full integration of these assets with the broader Phillips 66 value chain,” Lashier stated. “We also expect this transaction to unlock opportunities for low-capital, high-return projects that provide incremental long-term shareholder value.”