Cenovus Energy Sells Legacy Gas Assets
Canadian integrated producer Cenovus Energy announced September 25 the sale of its legacy oil and gas assets at Suffield/Alderson, in southeastern Alberta, to International Petroleum Corporation (IPC) for C$512mn (US$415mn). The sale is expected to close in the fourth quarter.
Net proceeds will be applied to the C$3.6bn (US$2.9bn) asset-sale bridge facility associated with Cenovus’s US$13.3bn purchase earlier this year of ConocoPhillips Canada.
Toronto Stock Exchange-listed IPC was created by the Lundin Group of Companies in April 2017 with assets in Malaysia, France and the Netherlands acquired from Lundin Petroleum.
Assets now being acquired by IPC from Cenovus cover a large, contiguous land position of 800,000 net acres of shallow gas rights at Suffield and 100,000 net acres of oil rights in the adjacent Alderson area. Production in 2017 is expected to average about 102mn ft3/day of natural gas and 6,900 b/d of crude oil, or a combined 24,000 boe/day, IPC said in a statement.
“This acquisition fits perfectly with IPC’s strategy of leveraging our existing producing asset base as a platform for value accretive acquisitions of long-life, low-decline producing assets in stable jurisdictions with upside development potential,” IPC CEO Mike Nicholson said. In the second quarter this year, the company had average production of 10,600 boe/day.
The sale agreement includes a deferred purchase price adjustment under which IPC will make payments to Cenovus for each month in which the average daily price for West Texas Intermediate is above US$55/b or the price of natural gas at Henry Hub exceeds US$3.50/mn Btu. The adjustments, which will be in place for two years beginning on January 1, 2018, are capped for each commodity, with a combined maximum payment of $36mn.
The Suffield assets were originally developed by Cenovus’s predecessor Alberta Energy Company (AEC) more than 30 years ago. In 2002, AEC merged with PanCanadian Energy to form Encana Corporation, which spun Suffield out as part of the asset package that created Cenovus in 2009.
Dale Lunan