UPDATE 2-Encana deal spurs Cenovus to eye sale of freehold lands

Thu Oct 23, 2014 1:08pm EDT
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(Recasts with details and comments throughout; updates shares)

By Scott Haggett

CALGARY, Alberta Oct 23 (Reuters) - Cenovus Energy Inc , Canada's No. 2 independent oil producer, said on Thursday it is mulling the future of its royalty-generating freehold oil and gas properties in Western Canada after competitor Encana Corp raised billions through the sale of similar properties.

Cenovus, whose shares rose 6 percent after it reported its third-quarter operating profit climbed by nearly a fifth, said it is looking at strategic alternatives for the lands, which currently produce about 8,000 barrels of oil equivalent per day.

It expects to announce its plans for the properties in the next three months, Brian Ferguson, the company's chief executive, said on a conference call.

"It is clear that there is more potential on these lands than we are currently realizing," Ferguson said. "We are assessing our options to maximize shareholder value and expect to announce a decision next quarter on what our plans will be."

Encana, the country's largest natural-gas producer, raised more than C$4 billion ($3.56 billion) through the sale of its freehold lands. Before the sale it had charged third-party oil and gas companies royalties to operate on the properties.

The popularity of Encana's offering has spurred other producers, including Canadian Natural Resources Ltd, to consider making similar moves.