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ConocoPhillips Exits Most Canadian Operations

Oil Rig

ConocoPhillips has struck a deal with Cenovus Energy to sell oil sands and gas operations in west Canada, following in the footsteps of international oil major, Shell, which recently exited Canada’s oil sands industry, and Marathon Oil’s oil sands divestment.

The Conoco deal is worth US$13.3 billion (C$17.7 billion) and includes 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, according to Reuters.

The company will, however, retain a 50-percent stake in another oil sands project, Surmont, where it partners with France’s Total, plus its 100 percent in a shale block, Blueberry-Montney.

Conoco planned to sell assets worth between $5 and $8 billion this year, and this latest deal comes on top of that, encouraging shareholders that the company is on track to slim down its debt pile and boost its cash position. The Cenovus deal is made up of a US$10.6 billion cash payment plus 208 million Cenovus shares. In addition, Conoco is entitled to additional payments over the next five years should the price of Western Canada Select top US$52.

According to Conoco’s chairman Ryan Lance, the divestment will allow the company to cut its debt load to US$20 billion and double the amount of stock it can repurchase to US$6 billion. Conoco will also benefit from its stake in Cenovus.

Cenovus, one of the biggest oil sands players in Canada, will double its daily output from the northern Alberta oil sands to 588,000 barrels of oil equivalent daily.

Related: Dakota Access Pipeline Loaded And Ready For Business

Shell announced its exit from most of its oil sands operations earlier this year as part of efforts to reduce its debt, accumulated with the acquisition of BG Group. Canada Natural Resources paid US$8.5 billion for the assets.

Marathon Oil also left the oil sands this year, in a US$2.5-billion deal with Shell and Canada Natural Resources, to focus almost exclusively on shale.

Statoil also sold most of its operations in the oil sands for $435 million to Atahabasca Oil Corp.

By Irina Slav for Oilprice.com

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