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Cenovus (CVE) Sells Weyburn Assets to Whitecap Resources


Cenovus Energy Inc. CVE recently agreed to divest its carbon dioxide enhanced oil recovery operation, Weyburn oil facility in Saskatchewan for C$940 million ($738.53 million) to Whitecap Resources Inc, based in western Canada. The sale of the oil facility, whose current production capacity is 11,500 barrels of oil equivalent per day, is expected to be completed by the fourth quarter of 2017.

The sale is in line with the company's divestment program targeted to support the acquisition of oil sands assets from ConocoPhillips COP for C$16.8 billion earlier this year. The Weyburn asset sale is the last of the company's four major divestitures that it targeted to raise proceeds of up to C$5 billion.

As part of this plan, the company sold its Pelican Lake assets to Canadian Natural Resources Limited CNQ in September. Later in the month, Cenovus agreed to divest its Suffield crude oil and natural gas operations to International Petroleum Corporation. In October, the company agreed to sell Palliser crude oil and natural gas assets to Torxen Energy and Schlumberger Limited SLB for cash proceeds of C$1.3 billion. So far, Cenovus’ asset sales have generated C$3.74 billion.

Cenovus also intends to use the proceeds to reduce its huge debt burden, optimize its asset portfolio and strengthen its balance sheet. The company currently has a long-term debt of C$12.1 billion. To reduce debt, the company might also divest some of its Deep Basin gas assets, which it acquired from ConocoPhillips in the first place.

Investors should know that with these deals, the company plans to bring down its net debt to operating earnings ratio below 2.

About Cenovus and Zacks Rank

Spun off from Encana Corp. in 2009, Cenovus is an integrated oil company headquartered in Calgary, Alberta, Canada. The company is 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.

The company delivered a positive earnings surprise of 125% in the third quarter of 2017.

Cenovus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Cenovus has lost 27.7% year to date compared with 4.3% decline of its industry.

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