Swedish company buys Cenovus assets on Suffield Block

International Petroleum Corporation excited to make first play on Canadian soil

The new owners of oil and gas interests on the Suffield Block called it a unique asset that has been “undercapitalized” in recent past, but a $512-million purchase could pay big dividends in the their hands.

Swedish energy firm International Petroleum Corporation announced Monday in Stockholm that it had bought the huge range in southeastern Alberta from Cenovus.

“It’s a relatively small asset (for Cenovus) and I think conventional oil and gas was undercapitalized,” said CEO Mike Nicholson, calling the block a unique, well-maintained, welldeveloped asset — a good entry point for his company to land in North America.

“We think there is a lot more value that can be extracted in the hands of the right operator with a focused team and some capital that can be deployed.”

That team includes an unknown number of Cenovus staff — “senior managers, operational staff, asset management experts and corporate support” — key in greenlighting the purchase, said Nicholson.

IPC is an international subsidiary of Swedish firm, the Lundin Group, which operates areas in France, the Netherlands and Malaysia. Another part of the company operates in Norway.

They have an office in Vancouver but no Canadian operations until this week.

“It’s a new country of entry for IPC,” he said, adding that site visits last week were positive. He also met with government officials, regulators and military officials at CFB Suffield.

“We’re pleased it’s fully operational assets and personnel will transfer with the assets, and we’ll benefit from that as we unlock the potential.”

The sale comes months after Cenovus announced it would include 800,000 acres of gas leases and 100,000 acres of oil leases at Suffield as it moved to divest most of its conventional oil and gas portfolio. The proceeds will help pay for its acquisition of Conoco-Phillips’ stake at shared oilsands facilities — a deal that included $3.6 billion in bridge financing.

Earlier this month Cenovus sold its Pelican Lake project in Northern Alberta for $975 million.

Cenovus’s Palliser Block, which extends west from Suffield into central Alberta, is also being marketed for sale. Cenovus reports have stated a sale could be announced in this fall’s financial report, due in January.

Palliser had been due for a new capital exploration program announced in 2016, though Cenovus suspended its new well program when the property was put up for sale.

An IPC presentation that accompanied the conference call states that Suffield already has 44 undeveloped oil well targets that could add 4 million barrels of oil reserves.

Polymer injection was a longer-term proposal, but refracking and other well reworking could go ahead in the short term.

“There’s some very low-hanging fruit,” said Nicholson.

No capital expenditures have taken place on the block for about three years. According to Nicholson, oil drilling stopped in 2014, and gas in 2010, but as far back as 2005 former owner Encana favoured targeting new gas which was highly priced at the time.

IPC guidance states the production is profitable at the C$10 per barrel price, meaning “significant uplift” when prices rise.

“From our perspective it’s acquitting a quality conventional go asset, it’s onshore, it’s highly cash positive and we can self-fund the development upside,” Nicholson said.

North American traders sent IPC stock inn Toronto 9 per cent higher by the close on Monday, settling the stock at C$5.35.

Lundin’s stock, traded in Stockholm, rose 7.2 per cent, closing at US$34.40.

Cenovus shares rose 10-cents to sit at $12.79.