Canadian Natural Resources Ltd (CNRL) has struck a deal to buy a range of heavy oil assets from Cenovus Energy for C$975 million (US$789.8 million). The deal was announced on September 5, with CNRL saying it was expected to close by September 30.
The package has production of 19,600 boepd, principally in the Greater Pelican Lake region with miscellaneous assets in northern Alberta. The company went on to say the assets had a gross operating margin of around C$150 million (US$121.5 million) in 2017.
The deal also increased CNRL’s stake in the Pelican Lake sales pipeline to 100%, up by 38%. Furthermore, it has gained some undeveloped land.
While CNRL’s statement was terse, Cenovus hailed the sale as the first step in overhauling its portfolio, following the acquisition of assets from ConocoPhillips. Cenovus’ president, Brian Ferguson, described it as a “significant first step”, which would also help reduce debt. “The divestiture processes for the remainder of our legacy conventional assets are proceeding as expected, with strong interest from potential buyers,” he said.
The company intends to use the proceeds to reduce the C$3.6 billion (US$2.9 billion) bridge facility, which was put in place to acquire assets from ConocoPhillips this year. This sale to CNRL will allow Cenovus to retire the first tranche of the facility, with two remaining tranches maturing in November 2018 and May 2019.
Cenovus went on to say its efforts to sell its Suffield assets were “well advanced” and that it had data rooms open on its Palliser holdings, in southern Alberta, and its CO2 enhanced oil recovery (EOR) interests in Weyburn, in Saskatchewan. Proceeds from these sales, and various other non-core assets, will go to paying down debt.
In July, Cenovus said it intended to sell C$4-5 billion (US$3.2-4.1 billion) of assets in 2017, while also reducing capital expenditure by C$200 million (US$162 million) to C$1.7 billion (US$1.38 billion). The company, in March, announced a C$17.7 billion (US$14.3 billion) deal to buy ConocoPhillips’ 50% stake in the FCCL Partnership, raising Cenovus’ holding to 100%.