ConocoPhillips has signed a definitive agreement with Cenovus to sell its 50% non-operated interest in the Foster Creek Christina Lake (FCCL) oil sands and majority of its western Canada Deep Basin gas assets for a combined consideration of $13.3bn.
ConocoPhillips Canada will continue to retain its 50% operated interest in the Surmont oil sands joint venture and 100% stake at Blueberry-Montney unconventional acreage.
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Under the transaction, ConocoPhillips will receive $10.6bn in cash to be payable at closing and 208 million Cenovus shares valued at $2.7bn.
Furthermore, the company will receive five years of uncapped contingent payments, payable when Western Canada Select (WCS) crude prices exceed C$52 per barrel.
ConocoPhillips chairman and CEO Ryan Lance said: “This transaction will make an immediate and significant impact on the company’s value proposition by allowing us to rapidly reduce debt to $20 billion and double our share repurchase authorisation to $6 billion.
“This means we will not only accelerate, but exceed, the three-year plan we laid out in November 2016. 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.
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By GlobalData“We will retain the upside to future oil price increases through our equity stake in Cenovus and an uncapped, five-year contingent payment.
“ConocoPhillips Canada will now focus exclusively on our Surmont oil sands and the liquids-rich Blueberry-Montney unconventional asset.
“Cenovus will assume sole ownership of FCCL and assume operations in the Deep Basin assets. This is truly a transformational event for both companies.”
The company has planned to use the cash portion procured through this sale transaction to reduce its debt to $20bn this year and increase the level and pace of share repurchases.
Completion of this transaction is subject to multiple preceding conditions, including regulatory review and approval.
