C$17.7B Cenovus deal seen as likely to be last oilsands blockbuster

C$17.7B oilsands deal may be last blockbuster

CALGARY — Cenovus Energy’s blockbuster $17.7-billion deal to buy most of the Canadian assets of Houston-based ConocoPhillips will likely stand as the biggest acquisition in the oilsands sector for years to come, say some industry watchers.

While other deals are expected to materialize, analysts note there are fewer significant assets available after more than a year of consolidation transactions in Alberta’s oilpatch worth billions.

“If you think about who’s left in terms of remaining players, there aren’t that many,” said Peter Argiris, principal analyst for consultancy Wood Mackenzie in Calgary.

“The days of $15-, $12- and $17-billion deals, I don’t think we’ll see that. I think the big ones are probably eaten up now.”

The deal is the largest this year involving Canadian oil and gas assets, according to data provided by Thomson Reuters.

Alberta’s oilsands, the third-largest proven oil reserves in the world, are also among the most costly and carbon-intensive to produce from. These factors, combined with the pullback in crude prices, have spurred several foreign players to exit the sector so they can reinvest their capital elsewhere. Big Canadian players like Cenovus have stepped in to buy, looking to better control costs by operating at a larger size.

Further consolidation can be expected, but probably on a smaller scale, said Nick Lupick, an analyst with AltaCorp Capital.

“Eventually, obviously, you will run out of opportunities given that you are likely to have three to five major E&Ps (explorers and producers) controlling most of the production,” Lupick said.

The cash-and-share deal was announced Wednesday after the close of Canadian and U.S. stock markets.

Cenovus shares closed down almost 14 per cent on Thursday at $15.05. The company had said it planned to raise C$3 billion in an equity offering to help pay for the C$14.1 billion cash portion of the acquisition, supplemented by cash on hand and debt financing.

The DBRS credit rating agency said Wednesday it would place Cenovus’s ratings under review with negative implications because of the increase in debt from the ConocoPhillips deal.

ConocoPhillips’s New York-listed shares closed up about eight per cent.

The latest deal comes three weeks after Canadian Natural Resources announced a C$12.74-billion offer to buy Alberta oilsands assets from Royal Dutch Shell and Houston-based Marathon Oil.

Earlier this year, Norway’s Statoil closed a deal to sell all of its Canadian oilsands assets for C$832 million to Calgary-based Athabasca Oil. And a year ago, Calgary-based Suncor Energy (TSX:SU) took majority control of Syncrude with a C$937-million purchase of American Murphy Oil’s five per cent stake.

Analysts say the environmental reputation of the oilsands as “dirty oil” likely influenced decisions to sell, especially by European companies. But a shift in strategy as U.S. benchmark oil prices plunged from over US$100 per barrel in mid-2014 to around US$50 is also seen as a major factor.

Argiris said the Cenovus-ConocoPhillips deal was a “natural consolidation” because they are equal partners in Foster Creek and Christina Lake, massive thermal oilsands projects in northern Alberta.

He said ConocoPhillips signalled late last year it wanted to sell assets to pay down debt — the Cenovus sale allows it to do that while continuing to focus on shale oil in the U.S., plus a portfolio that includes production from Asia-Pacific and Europe.

The American company isn’t completely leaving the oilsands. It will also continue to operate and own half of the Surmont oilsands project in northern Alberta, with French giant Total holding the other half.

Follow @HealingSlowly on Twitter.

Dan Healing, The Canadian Press

Just Posted

Rockets lose to Blazers in nail-biting shootout

The Rockets came back to tie the game 2-2, but would ultimately lose in a nine-round shootout.

Okanagan brothers recognized with medals of bravery for saving four from drowning in 2013

The two brothers saved four from drowning after they were swept into the rough waters of Wood Lake.

Kelowna author releases 2nd book with stories of overcoming personal trauma

The launch for Diana Reyers’ Trauma to Recovery comes to Kelowna Sept. 21

Rockets make cuts to Memorial Cup roster

The Kelowna Rockets re-assigned three players to their respective farm-affiliates on Sunday.

Unsecure wheelbarrow causes motorcycle crash in West Kelowna

One person injured in a motorcycle crash in West Kelowna.

VIDEO: Vancouver Island mayor details emergency response after fatal bus crash

Sharie Minions says she is ‘appalled’ by condition of road where bus crashed

Video: Rain doesn’t deter Terry Fox runners in Salmon Arm

Dozens showed up to continue the Canadian icon’s marathon of hope.

Conservatives promise tax cut that they say will address Liberal increases

Scheer says the cut would apply to the lowest income bracket

B.C. VIEWS: Cutting wood waste produces some bleeding

Value-added industry slowly grows as big sawmills close

Fewer trees, higher costs blamed for devastating downturn in B.C. forestry

Some say the high cost of logs is the major cause of the industry’s decline in B.C.

Federal food safety watchdog says batch of baby formula recalled

The agency says it’s conducting a food safety investigation

Road block was costly legal battle for Summerland

Resolving Garnet Valley dispute took six years

UVic president offers condolences after two students killed in bus crash

‘We also grieve with those closest to these members of our campus community,’ Cassels says

Coming Home: Penticton fire chief and disaster dog return from hurricane-ravaged Bahamas

The pair spent roughly one week on Great Abaco Island assisting in relief efforts

Most Read