Cenovus considers selling up to US$5 billion in securities

18 February 2016, Week 06, Issue 391

Canada’s Cenovus Energy has said it may sell up to US$5 billion of stock, debt or other securities. This news came a day after the oil sands producer announced a dividend cut of 69% to help shore up its balance sheet. Low oil prices have hit Canadian producers particularly hard because of their higher costs and the fact that Canadian oil generally trades at a discount to the US and global benchmarks.

Calgary-based Cenovus filed with the US Securities and Exchange Commission (SEC) to sell securities in one or more separate offerings. Its stock is traded in both Toronto and New York.

The company has also said it would cut its 2016 budget by C$400-500 million (US$291-364 million) – reducing its capital expenditure for the year to C$1.2-1.3 billion (US$875-948 million) – as well as cutting more jobs. In 2015, the company reduced its number of employees by 24%.

Last year, Cenovus also agreed to sell its Heritage Royalty Limited Partnership subsidiary to the Ontario Teachers’ Pension Plan for the equivalent of US$2.7 billion in one of the largest upstream deals in North America in 2015.

In the US, other producers have recently launched stock offerings, including Dallas-based driller Pioneer Natural Resources, which announced in January that it planned to offer 12 million new shares. It raised US$1.4 billion, more than expected, suggesting that capital markets were still willing to invest in shale production.

Also in January, Oasis Petroleum said it would offer 34 million shares to raise US$160 million. It had previously said it would cut its capex estimate for 2016 by about 30%.

Cenovus’ planned capex reduction for 2016 includes lower spending at its Foster Creek and Christina Lake oil sands projects, as well as at its emerging oil sands assets and its conventional operations. The planned capex cut is expected to have minimal impact on its oil sands production for 2016, said Cenovus. The company has forecast its oil sands production to be 144,000-157,000 barrels per day net. 


Edited by

Anna Kachkova


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