It is announced this week that ConocoPhillips (NYSE: COP) would sell its position in the Foster Creek Christina Lake oil sands partnership and the majority of its western Canada Deep Basin gas assets to Cenovus Energy. The oil sands and natural gas assets will be sold at $10.6 billion in cash, and ConocoPhillips will receive shares of Cenovus in $2.7 billion, which was $13.3 billion (C$17.7 billion) in total.
After the announcement, shares of ConocoPhillips rose over 7% on Thursday morning, while shares of Cenovus were down over 10%, which was the biggest one-day fall ever.
The $13.3 billion acquisition of Cenovus was the fifth-biggest Canadian energy deal on record, and after the deal, Cenovus will become the sole owner of Foster Creek and Christina Lake oil sands projects. However, ratings agency DBRS places Canada-based Cenovus under review with negative implications, because the deal surpasses Cenovus’s market capitalization of C$12.8 billion.
“This is a significant, win-win opportunity for ConocoPhillips and Cenovus,” Ryan Lance, the ConocoPhillips CEO and chairman, said in a statement. He added that the deal would “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”.