The Cenovus Christina Lake oil sands facility southeast of Fort McMurray, Alta. In the most recent quarter, the company produced 832,900 barrels of oil equivalent a day, up from 771,300 a year earlier.AMBER BRACKEN/The Canadian Press
Cenovus Energy Inc. CVE-T is under no pressure to sell assets once it completes its $8.6-billion takeover of fellow oil sands producer MEG Energy Corp. MEG-T, its chief executive officer said on Friday after the company reported big gains in quarterly profit and production.
Cenovus sealed its acquisition of MEG early this week after a lengthy bidding war against Strathcona Resources Ltd., a deal that is expected to boost its oil sands output by more than 15 per cent.
Jon McKenzie, Cenovus’s CEO, said the Calgary-based company will maintain its financial wherewithal after the cash-and-stock purchase, avoiding any urgency to raise money from asset sales to fund it. It had bolstered its balance sheet in September by selling its half interests in two U.S. refineries for US$1.4-billion and is targeting $400-million in annual costs savings from the deal by 2028.
“There is no burning platform or need to de-lever after doing this transaction. We’re very comfortable with the level of debt we’re going to be taking on to get this deal done and through time we’ll get back to the $4-billion of net debt,” Mr. McKenzie said on a conference call.
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He said the company continually examines its overall portfolio to look for ways to improve its business, including trimming assets. But it would not launch an acquisition of this magnitude if the deal stood to “corrupt the balance sheet and put our equity holders in harm’s way.”
In a new twist, MEG on Thursday adjourned a shareholder meeting to vote on the transaction until next Thursday after an inquiry from the Alberta Securities Commission. The inquiry was made in response to an investor demanding more details about a side deal between Cenovus and Strathcona. Mr. McKenzie said the investor is a former employee of MEG who owns about 4,000 shares.
Both MEG and Cenovus have said that to satisfy the ASC, they would provide additional information on Cenovus’s sale of heavy oil assets to Strathcona for $150-million. That transaction was disclosed on Monday when Cenovus announced Strathcona will vote its 14-per-cent stake in MEG in favour of Cenovus’s increased offer, ending the takeover battle.
The deal has the support of 86 per cent of MEG shareholders and Cenovus expects the deal to close by mid-November, MEG said in a statement.
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In the third quarter, Cenovus produced a company record 832,900 barrels of oil equivalent per day, up from 771,300 a year earlier, boosted by higher volumes at its Foster Creek and Christina Lake oil sands projects. The latter is adjacent to MEG’s main operations.
Drilling at the company’s West White Rose project offshore Newfoundland, meanwhile, is due to start by the end of the year, with first production expected in 2026.
Quarter net income rose to $1.3-billion, or 72 cents a share, from year-earlier $820-million, or 42 cents, driven by an increase in sale volumes, higher benchmark oil prices and lower operating costs.
Cenovus shares rose about 1 per cent to close at $23.70 on the Toronto Stock Exchange, up 5 per cent from the time it announced its initial rival bid for MEG in August.