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ConocoPhillips has closed a deal to sell its assets in the San Juan Basin in the Southwestern U.S. to Hilcorp Energy Company for US$3 billion, bring its total divestment proceeds for 2017 to US$16 billion. The company said that it will use the proceeds from the San Juan deal for general corporate purposes.
The bulk of the deal’s value, US$2.7 billion, will be paid in cash, and the remainder is contingent on certain conditions.
The divestment comes soon after the oil major agreed with Canada’s Cenovus to sell it almost all of its oil sands operations for a hefty US$13.3 billion. The assets included Conoco’s 50-percent stake in the Foster Creek Christina Lake project, which the U.S. company ran together with Cenovus as operator, and most of its conventional offshore natural gas assets in the Deep Basin. This makes the divestment the largest in Conoco’s history, as it ramps up its footprint in the Permian and shifts from big-spend offshore projects to the security of returns in the shale patch.
The San Juan Basin operations produced some 124,000 barrels of oil equivalent daily last year, of this 80 percent natural gas. For this year, production estimates are for 115,000 boepd, of which 80 percent gas.
Conoco’s chief executive Ryan Lance said that the divestment will reduce the company’s exposure to natural gas in North America and improve cash margins. The Cenovus deal, for its part, should help bring Conoco’s debt down to US$20 billion and will enable it to buy back shares worth up to US$6 billion.
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Cenovus, meanwhile, is itself selling assets to be able to pay Conoco for the oil sands operations. It has already tapped into a credit line to fund the cash part of the deal, which stands at US$10.6 billion, plus a bridge loan and a share placement to the tune of US$2.27 billion (C$3 billion), at a discount to the current trading price of the stock.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.