CORRECTED-RPT-Canadian energy companies sell "jewels" to keep oil sands afloat
(Corrects Sunrise price tag in 14th paragraph to C$3.2 billion from C$2.5 billion)
By Nia Williams and Euan Rocha
CALGARY, Alberta Feb 9 (Reuters) - Faced with record low prices for heavy crude, Canadian energy companies are sacrificing other parts of their business to keep higher-cost oil sands production going and safeguard the billions already invested in these multi-decade projects.
Companies including Husky Energy Inc, MEG Energy Corp and Pengrowth Energy Corp are selling assets or slowing light and conventional oil exploration and production, even as they forge ahead with oil sands projects that are in many cases bleeding money on every barrel.
Although the move to support higher-cost production seems counterintuitive, oil sands companies take a longer-term view that shutting plants in Alberta would be very expensive and risk permanently damaging carefully-engineered reservoirs, underground deposits of millions of barrels of tarry bitumen.
It is easier, and cheaper, to shut down and later restart conventional wells.
Producers are also betting that oil prices will eventually recover. The latest Reuters poll of oil analysts forecasts the U.S. benchmark will average $41 a barrel in 2016, a level where most Canadian oil sands projects can break even.
Bankers say the need to bolster balance sheets and cover oil sands losses will boost the number of Canadian energy deals this year, particularly sales of pipelines, and storage and processing facilities.
"The market was down significantly last year in terms of energy M&A, and we think that's going to reverse," said Grant Kernaghan, Canadian Investment Banking head for Citigroup. Continued...