Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) has made significant progress executing on its previously announced financing plan for the company's $17.7 billion purchase of assets in Western Canada from ConocoPhillips. The acquisition is expected to close in the second quarter of this year.
Since the agreement was announced on March 29, 2017, Cenovus has successfully completed a planned $3.0 billion bought-deal common share financing and priced a US$2.9 billion offering of senior notes. The company is also issuing common shares to ConocoPhillips and intends to use a portion of its existing cash on hand and available credit facility capacity to help finance the acquisition. Cenovus has fully committed bridge financing in place to manage timing differences in the funding of the transaction.
Key elements of the financing plan:
As part of its plan to deleverage and strengthen its balance sheet, Cenovus has already begun marketing its legacy conventional oil and natural gas assets at Pelican Lake and Suffield and expects to make additional asset divestitures as required. Asset sale proceeds and free funds flow are expected to be applied against Cenovus's asset-sale bridge loan and draws on its existing credit facility. Over the long term, Cenovus will continue to target a debt-to-adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) ratio of 1.0 to 2.0 times and debt to capitalization of 30% to 40%.
On closing of the acquisition, the company anticipates having approximately $4 billion in remaining liquidity, including $1 billion in cash on hand and $3 billion in unused capacity on its committed credit facility. On a pro forma basis, assuming the successful closing of the acquisition and including the anticipated impact of planned asset sales, Cenovus expects to have capacity to generate 2018 free funds flow of approximately $500 million in a US$50 West Texas Intermediate (WTI) price environment.
Cenovus Energy Inc.
Cenovus Energy Inc. is a Canadian integrated oil company. It is committed to applying fresh, progressive thinking to safely and responsibly unlock energy resources the world needs. Operations include oil sands projects in northern Alberta, which use specialized methods to drill and pump the oil to the surface, and established natural gas and oil production in Alberta and Saskatchewan. The company also has 50% ownership in two U.S. refineries. Cenovus shares trade under the symbol CVE, and are listed on the Toronto and New York stock exchanges.
SOURCE: Cenovus Energy Inc
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