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    Canada's Cenovus to Sell Palliser Gas Asset

Summary

Canada’s Cenovus Energy has reached agreement to sell its southern Alberta Palliser Block for C$1.3bn to Torxen Resources and Schlumberger.

by: Dale Lunan

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Canada's Cenovus to Sell Palliser Gas Asset

Canadian producer Cenovus Energy said October 19 it has reached agreement to sell its southern Alberta Palliser Block for C$1.3bn (US$1bn) to a partnership of Torxen Resources and oilfield services provider Schlumberger. The sale is expected to close in the fourth quarter this year.

Cenovus has been busy selling non-core assets to help pay for its C$17.7bn acquisition earlier this year of ConocoPhillips Canada

Palliser Block consists of oil and gas wells, surface facilities, a pipeline network and about 800,000 acres of oil and gas development rights. Production is currently averaging about 54,000 barrels of oil equivalent/day (boe/d), of which about 77% or 41,580 boe/d (250mn ft³/day) is natural gas.

The sale is the third major deal announced by Cenovus since the ConocoPhillips acquisition was announced in March. In September, the company reached agreement to sell its oil and gas assets at Suffield/Alderson to International Petroleum for C$512mn and its Pelican Lake heavy oil operations in northeastern Alberta to Canadian Natural Resources for C$975mn.

A deal to sell its Weyburn enhanced oil recovery project in Saskatchewan is expected by the end of this year, and evaluations are continuing regarding the sale of certain Deep Basin assets acquired from ConocoPhillips.

“Our strategy to optimize our portfolio by selling non-core assets and using the proceeds to pay down debt is firmly on track,” Cenovus CEO Brian Ferguson said. “We continue to target between $4bn and $5bn in announced asset sale agreements by the end of the year, and we remain committed to returning to our long-term debt ratio target.”

Schlumberger will be the majority non-operating owner of the Palliser Block, with the rights to exclusive service provision, while Torxen, which is headed by former Cenovus Energy COO John Brannan, will be the operator. The oil-focused development strategy includes a multiyear drilling program of more than 1,600 oil wells starting in 2018.

“Schlumberger is very pleased to partner with Torxen in the Palliser Block,” Patrick Schorn, Schlumberger’s executive vice-president, new ventures, said. “By leveraging our reservoir knowledge, oilfield services technology and project management expertise, we expect to lower development costs and maximize the value of this asset – in a market where our traditional business model is challenged to deliver the required financial returns.”

 

Dale Lunan