Cenovus Energy Inc has received separate bids from Canadian Natural Resources Ltd, Canadian private equity firm ARC Financial Corp and others for a heavy oil project in Pelican Lake, Alberta, according to people familiar with the matter who told Reuters the project was valued at as much as $1 billion (US$796 million).
Calgary-based Cenovus is also in advanced talks to sell another oil project in Suffield, Alberta, which is likely to fetch between $500 million and $600 million, the people added.
Cenovus has also received strong inbound interest from TransCanada Corp, Enbridge Inc, Pembina Pipeline Corp, Keyera Corp and Inter Pipeline Ltd for buying all or parts of separate midstream assets in the Deep Basin, the people said. But there was no formal sale process underway for Deep Basin, a region that straddles Alberta and British Columbia, the people added.
Cenovus shares were up on Friday, and extended gains after Reuters reported the bids, rising as much as much as 6 percent to $10.74. By midday, the stock had moderated gains and stood at $10.49, up 3.6 percent, much more than the 0.4 percent gain for the benchmark Canada share index .GSPTSE.
Cenovus shareholders and investors will watch closely for any news on the divesture program, said Wood Mackenzie analyst Mark Oberstoetter.
“That’s a big focus for the second half of the year for them,” he said. “There’re probably many factors at play, and anything encouraging on a potential sale will be a positive for Cenovus, until we get an announcement.”
Cenovus last month said it expected asset sales could fetch more than $5 billion by the end of this year. It has been seeking buyers for parts of its portfolio to pay off debt used to part-fund its $16.8 billion purchase of some ConocoPhillips Co assets in May.
That deal effectively doubled the size of company’s producing assets, but sent Cenovus shares tumbling, prompted some investors to revolt and led to the resignation of Chief Executive Brian Ferguson.
Cenovus spokesman Brett Harris said on Thursday the sale processes for Pelican Lake and Suffield were “proceeding well.” He declined to elaborate. Canadian Natural, Enbridge, Inter Pipeline, Keyera, Pembina and TransCanada declined comment. ARC did not respond to requests for comment.
Deep Basin conventional natural gas assets, which Cenovus bought from ConocoPhillips, has attracted interest from private equity firms as well, the people said. Midstream assets, which process or transport gas from Deep Basin, are attractive to buyout firms as the revenue from this business is less volatile.
Cenovus has not decided on timing for that sale, the people said. If it meets price objectives for the other assets, it will likely hold off on the Deep Basin sale until production increases, so it can fetch a higher price, the people said.
(Reporting by John Tilak in Toronto, Ethan Lou in Calgary; Additional reporting by David French in New York; Editing by Denny Thomas and David Gregorio)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Cenovus Energy Inc