ConocoPhillips sells oil and gas assets to Cenovus for $13.3 billion

Wed Mar 29, 2017 8:29pm EDT
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By Nia Williams and Ethan Lou

CALGARY, Alberta (Reuters) - ConocoPhillips (COP.N: Quote) on Wednesday agreed to sell oil sands and western Canadian natural gas assets to Cenovus Energy Inc (CVE.TO: Quote) for C$17.7 billion ($13.3 billion), making it the latest international oil major to pull back from a region where high costs and low crude prices have made it hard for large companies to make an acceptable return.

For Calgary-based Cenovus, among Canada's largest producers, the deal doubles its production to 588,000 barrels of oil equivalent per day as it takes full ownership of its main oil sands assets in northern Alberta.

ConocoPhillips will sell its 50 percent interest in the Foster Creek Christina Lake oil sands partnership, which Cenovus already operates, as well as the majority of its western Canada Deep Basin conventional gas assets.

The U.S. oil major will retain its 50 percent interest in the Surmont oil sands project, a joint venture with Total E&P Canada (TOTF.PA: Quote), and its liquids-rich Blueberry-Montney shale assets.

The divestment, the largest in ConocoPhillips's history, was unexpected on Wall Street but comes as the company has come under pressure to cut its debt. Its shares jumped 6 percent in after-hours trading.

Shares of Cenovus listed on the New York Stock Exchange tumbled more than 8 percent after hours.

The deal, the fifth-biggest in the Canadian energy sector according to Thomson Reuters data, comes weeks after Royal Dutch Shell (RDSa.L: Quote) and Marathon Oil Corp (MRO.N: Quote) sold off billions of dollars in oil sands assets and adds to uncertainty over future development in the patch.

Canada's oil sands hold the world's third-largest crude reserves but also carry some of the highest operating costs globally, and are struggling to compete with cheaper U.S. shale plays in a $50-a-barrel oil price environment.   Continued...