Cenovus Closer to Taking Top Spot in Canadian Thermal Production as Deal with ConocoPhillips Progresses

Researched by Industrial Info Resources (Sugar Land, Texas)--Cenovus Energy Incorporated (NYSE:CVE) (Calgary, Alberta) is making rapid strides in its effort to double its production and reserves in Canada through a $13.3 billion purchase of assets held by ConocoPhillips (NYSE:COP) (Houston, Texas) that will establish Cenovus as Canada's largest thermal producer. Industrial Info is tracking $3.26 billion in active projects involving Cenovus.

Cenovus recently agreed to acquire ConocoPhillips' 50% interest in the Foster Creek/Christina Lake Partnership, an oil sands venture jointly owned by the two companies and operated by Cenovus. Cenovus also agreed to buy the majority of ConocoPhillips' Deep Basin conventional assets in Alberta and British Columbia. Cenovus says these two properties are expected to produce 298,000 barrels of oil-equivalent per day.

The company already is planning a pair of $800 million expansions at its Christina Lake Bitumen Production Plant in Fort McMurray, Alberta. Each would involve the construction of a 50,000-barrel-per-day (BBL/d) bitumen-processing plant and the expansion of a steam-assisted gravity drainage (SAGD) gathering field, eventually bringing the total production capacity to 288,800 BBL/d. For more information, see Industrial Info's project reports on the 1G expansion and the 1H expansion.

"I'm extremely pleased with the milestones we've achieved to date," said Brian Ferguson, the president and chief executive officer of Cenovus, in a press release. "We're doing what we said we'd do. And as we move forward with our plan to complete this acquisition, we'll remain focused on preserving our financial resilience, strengthening our balance sheet and maintaining our investment-grade credit ratings."

Cenovus plans to finance about $1.35 billion of the ConocoPhillips purchase from property sales at its Pelican Lake and Suffield conventional oil and natural gas assets, in addition to some others; the company says the two properties produce about 47,600 barrels of oil-equivalent per day, consisting of nearly 29,000 barrels of crude and 112 million cubic feet a day of gas. Cenovus has detailed other aspects of its financing plan, which includes $3 billion in bought-deal common share financing; a $2.9 billion offering of senior notes; and the issuance of common shares to ConocoPhillips.

Also in Fort McMurray, Cenovus is proposing a trio of $500 million expansions at its Surmont Oil Sands Production Plant. Each phase would involve the drilling of more than 50 wells and the construction of a gathering system and processing plant, with a capacity of 45,000 BBL/d of bitumen from the oil sands, to eventually increase capacity from 148,000 to 283,000 BBL/d. The expansions are in an extensive permitting process, and the first of these three phases would not begin construction until mid-2019 at the earliest. For more information, see Industrial Info's project reports on Phase III, Phase IV and Phase V.

ConocoPhillips' Canadian subsidiary will retain its operated 50% interest in the Surmont oil sands joint venture as part of the deal, as well as its fully operated Blueberry-Montney unconventional acreage position. Some developments in the Blueberry-Montney area are serviced by Pembina Pipeline Corporation's (NYSE:PBA) (Calgary) Blueberry pipeline system, which runs northwest of Taylor to the Highway/Blair Creek area of British Columbia.

Pembina is planning a $210 million pipeline to run parallel to the Blueberry System, as part of its Northeast British Columbia (NEBC) Expansion project. The 160-kilometer, 12-inch-diameter pipeline would carry condensate and natural gas liquids from the Montney play to Taylor. For more information, see Industrial Info's project report.

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