Canadian oil major, Cenovus Energy Inc. (CVE - Free Report) recently announced that it has agreed to divest its Suffield crude oil and natural gas operations to International Petroleum Corporation. The assets are located in southern Alberta, Canada.
Per the deal, Cenovus will receive gross cash proceeds of C$512 million from International Petroleum. Both the companies agreed to a contingency arrangement, where International Petroleum will pay Cenovus up to C$36 million more if the U.S. oil price moves to $55 to $60 a barrel limit and U.S. gas prices rise to $3.50 to $4 per million British thermal units limit in the next two years. The deal is expected to close in the fourth quarter of 2017.
The sold assets include Cenovus's Canadian Forces Base Suffield properties and its adjacent Alderson property. Current production level from the assets is 23,700 barrels of oil equivalent a day, of which 72% is natural gas.
The net proceeds from this transaction along with the proceeds from Greater Pelican Lake asset sale will enable Cenovus to reduce its $3.6 billion debt, following the acquisition of oil sands assets from ConocoPhillips (COP - Free Report) earlier this year.
The deal is in line with Cenovus' strategy to divest $5 billion worth of assets. Including the latest deal, the company generated $1.5 billion in divestitures.
In this context, we would like investors to know that the company will sell its Palliser assets in southern Alberta and the Weyburn assets in Saskatchewan next. The deals are expected to be over in the fourth quarter of 2017. Cenovus has put Weyburn's carbon dioxide enhanced oil recovery operations up for sale.
Also, we would like to remind investors that recently Cenovus agreed to divest its heavy oil properties in Pelican Lake and other eclectic assets to Canadian Natural Resources Limited (CNQ - Free Report) for C$975 million ($787 million) in cash.
Spun off from Encana Corp. (ECA - Free Report) in 2009, Cenovus is an integrated oil company headquartered in Calgary, Alberta, Canada. The company remains focused on growing its oil projects and establishing natural gas and crude oil production in Alberta and Saskatchewan. Cenovus continues to work on advancing technologies to reduce the amount of water, steam, natural gas and electricity used in operations and to decrease surface land disturbance.
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