Cenovus CEO touts Conoco deal

‘Financially resilient’ even at US$50 oil

chief executive Brian Ferguson says the company is encouraged by interest in its plan to divest assets to fund part of its $17.7 billion deal to buy ConocoPhillips’ Canadian holdings, which should improve investor sentiment around the acquisition.

The Calgary-based CEO, who has seen his company’s market capitalization drop by 15 per cent since the deal was announced, said asset divestiture was the question most frequently asked by investors as they scrutinize the complex transaction.

“We’ve had multiple inbound inquiries from various sources, private equity funds, pension plans, smaller companies, letting us know that they’re interested in the assets,’’ Ferguson said during a media briefing at a conference organized by the Canadian Association of Petroleum Producers in Toronto.

In late March, Cenovus said it would buy out partner ConocoPhillips’ 50 per cent stake in jointly controlled oilsands assets in addition to acquiring Conoco’s Deep Basin assets in Alberta and British Columbia.

When completed in the second quarter, the deal will raise Cenovus’ production by just under 300,000 barrels of oil equivalent per day, to 588,000 boepd.

But the assets come at a significant price and increase the company’s indebtedness at a particularly troubled time for the industry. Cenovus will pay the high price tag by various means, including whittling down its $3.7 billion cash war chest to $1 billion; raising $3.3 billion in a bought deal; issuing $3.9 billion in credit notes; and targeting $3.6 billion from asset divestments.

Conoco will also receive a $3.6-billion equity stake in Cenovus.

“The recurring question we are getting is the plan to deleverage the balance sheet,” Ferguson said.