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Centrica (CPYYY) to Divest Canada-Based E&P Assets for $305M


British energy supplier Centrica plc CPYYY recently announced that it is about to divest its Canadian oil and gas exploration and production joint venture – CQ Energy Canada Partnership – to a consortium that includes, among others, Hong Kong-listed energy company MIE Holdings Corporation. Centrica owns 60% operating interests in the properties that mostly produce natural gas.

The deal, which requires shareholder and regulatory approvals, is expected to be completed in the second half of 2017 and is likely to generate £240 million ($305 million) in net proceeds for Centrica.

Reason for the Sale

The cash-only transaction is in line with Centrica’s strategy to concentrate on its European assets, especially in the UK, Netherlands and Norway, as announced in Jul 2015. In the previous month, the company concluded the sale of its Trinidad and Tobago gas assets to Royal Dutch Shell plc RDS.A.

The proceeds from the transaction will be used for reducing Centrica's net debt to approximately $3.2-$3.8 billion by the end of 2017. The company targets adjusted operating cash flow of more than $2.6 billion in this time period.

About the Exploration and Production Asset

Centrica is the joint owner of the asset in the Western Canadian Sedimentary Basin along with Qatar Petroleum. The region has five main operating hubs, namely Foothills, Hanlan-Robb, North, Peace River Arch, and South. Total production from the asset is approximately 60,000 barrels of oil equivalent per day.

About Centrica

Headquartered in Windsor, United Kingdom, Centrica is a growing integrated energy company operating in the U.K., North America, and Europe. It secures and supplies gas and electricity to millions of homes and businesses and offers a distinctive range of home energy solutions and low-carbon products and services.

Price Performance

In the last one month, Centrica, belonging to the Zacks categorized Utility – Gas Distribution industry, recorded 1.15% increase in its stock price, while the broader industry witnessed an increase of 1.4%.

Zacks Rank and Stocks to Consider

Centrica presently has a Zacks Rank #2 (Buy). Some better-ranked stocks in the oil and energy sector include Delek US Holdings, Inc. DK and Canadian Natural Resources Limited CNQ. Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 71.4% year over year. The company recorded a positive average four-quarter earnings surprise of 60.7%.

Canadian Natural Resources’ sales for the second quarter of 2017 are expected to increase 26.9% year over year. The company recorded a positive earnings surprise of 30.8% in the first quarter of 2017.

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