April 23, 2017 / 8:19 PM / 2 years ago

Cenovus may sell parts of acquired natural gas assets: analysts

A warning sign is pictured near wellheads that inject steam into the ground and pump oil out at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project 120 km (74 miles) south of Fort McMurray, Alberta, August 15, 2013. REUTERS/Todd Korol

CALGARY, Alberta (Reuters) - Canada’s Cenovus Energy Inc (CVE.TO) has said it may sell parts of the Deep Basin natural gas assets it recently bought from Houston-based ConocoPhillips (COP.N), Royal Bank of Canada (RBC) analysts wrote in a research note on Sunday.

Cenovus Chief Executive Brian Ferguson held a conference call with analysts last Friday, and the oil company “signaled that it would also be open to potentially monetizing some portion of the Deep Basin midstream assets,” according to the note.

“Cenovus has had seven inbound calls from CEOs of various energy companies looking to ensure the company is aware of their interest in certain Deep Basin assets,” the analysts wrote.

RBC acted as an advisor for Cenovus for the ConocoPhillips deal.

Cenovus did not immediately respond to a request for comment.

The C$17.7-billion ($13.3-billion) acquisition last month of ConocoPhillips oil and gas assets effectively doubles the size of Cenovus. But the deal dents the company’s pristine balance sheet and saddles the pure-play crude producer with Deep Basin natural gas assets that some investors and analysts have said it has no business holding.

Cenovus shares crashed last month in their biggest single-day drop on news of the deal, which is to be funded through debt and selling shares and what the company deems to be “non-core” assets.

“Select assets within the Deep Basin could be tagged as non-core,” according to the RBC note. “This was new to us and opens up interesting de-leveraging possibilities for Cenovus.”

While the company had wanted to raise C$3.6 billion through asset sales, it may end up raising more, according to the note.

Reporting by Ethan Lou in Calgary, Alberta; Editing by Chris Reese

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