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Cenovus to buy Canadian assets from Conoco in 'transformational' C$17.7B deal

Cenovus Energy Inc. reached an agreement to acquire a suite of ConocoPhillips Co.'s Canadian assets in a deal valued at C$17.7 billion.

Cenovus said after market hours March 29 that it agreed to acquire Conoco's 50% stake in the FCCL Partnership, a joint venture between the two companies in the Canadian oil sands operated by Cenovus. The company is also buying Conoco's Deep Basin conventional assets in Alberta and British Columbia.

"This transformational acquisition allows us to take full control of our best-in-class oil sands projects and to add a second growth platform across the prolific Deep Basin that provides complementary short-cycle development opportunities," Cenovus President and CEO Brian Ferguson said in a news release. "Going forward, we plan to focus capital spending on these two value platforms. At the same time, we intend to divest a significant portion of our legacy conventional assets to help fund the transaction."

The Canadian company said it would pay Conoco C$14.1 billion in cash and issue 208 million common shares as part of the agreement, which is expected to close in the second quarter. Cenovus said it was also launching a bought-deal offering of common shares for expected gross proceeds of C$3 billion.

"Combined, these assets have forecast 2017 production of approximately 298,000 barrels of oil equivalent per day," Cenovus said. "The acquisition is immediately accretive to key metrics, and, assuming the successful completion of a planned divestiture program, is expected to result in an 18% increase in 2018 adjusted funds flow per share compared with Cenovus's original 2018 forecast."

Cenovus said the deal will make it Canada's largest thermal oil sands producer and "one of the country's largest oil and gas producers."

Conoco CEO Ryan Lance said in a separate statement that the agreement will help both sides.

"This is a significant, win-win opportunity for ConocoPhillips and Cenovus," he said. "This transaction will make an immediate and significant impact on the company's value proposition by allowing us to rapidly reduce debt to $20 billion and double our share repurchase authorization to $6 billion. ConocoPhillips Canada will now focus exclusively on our Surmont oil sands and the liquids-rich Blueberry-Montney unconventional asset. ... This is truly a transformational event for both companies."