LONDON, UK / ACCESSWIRE / March 31, 2017 / Active Wall St. blog coverage looks at the headline from ConocoPhillips (NYSE: COP) and Cenovus Energy Inc. (NYSE: CVE). ConocoPhillips announced on March 29, 2017, that it has signed a definitive agreement with Calgary-based Cenovus Energy to sell a significant portion of its Canadian assets for approximately $13.3 billion. Under the terms of the agreement, ConocoPhillips will sell its 50% non-operated interest in the Foster Creek Christina Lake (FCCL) oil sands partnership, and majority of its western Canada Deep Basin gas assets. Register with us now for your free membership and blog access at:

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Breaking down the Agreement

The assets being sold have estimated full-year FY17 production of 280 thousand barrels of oil equivalent per day after net royalty (NAR), comprising of approximately two-thirds of liquids and one-third of gas. Additionally, the full-year estimated production and operating expenses associated with the assets being sold is $0.4 billion. The previously stated estimate of the cash provided by operating activities of $6.5 billion, or $50 per barrel, remained unchanged. The year-end FY16 reserves associated with the asset dispositions were 1.3 billion barrels of oil equivalent NAR.

The net proceeds from the transaction are $13.3 billion, including a $10.6 billion of cash payment, payable at closing, and 208 million Cenovus' shares, valued at $2.7 billion as on March 28, 2017. Additionally, ConocoPhillips will receive five years of uncapped contingent payments, triggered when Canada Select crude prices exceed $52 Canadian dollar per barrel.

Strategic Output for ConocoPhillips

ConocoPhillips intends to use the cash portion of the transaction proceeds to reduce debt to $20 billion in 2017 and increase the level and pace of share repurchases. The Company intends to triple its planned FY17 buybacks from $1 billion to $3 billion, where the remaining $3 billion is allocated to FY18 and FY19. This agreement is set to double existing share repurchase authorization to $6 billion enabling the Company to accelerate value proposition.

This deal enables ConocoPhillips to reduce both its debt and exposure to the higher-cost Canadian oil sands. While Canada's oil sands hold the third-largest crude reserves in the world, it also carries some of the highest operational costs globally. ConocoPhillips will retain 50% interest in the Surmont oil sands joint venture and all of its operated Blueberry-Montney formation unconventional acreage.

Cenovus Growth Prospects

This transaction enables Cenovus to acquire full control of some Western Canadian Oil Sands assets and adds another three million net acres to its net natural-gas rich Deep Basin portfolio. The acquisitions will double the Company's production to 588,000 Boe/d. Cenovus views this transaction as a step to double its scale and deliver a greater competitive edge. Post the completion of this transaction, Cenovus plans to focus capital investments on these two platforms which offer multiple growth opportunities for the following decade.

ConocoPhillips Disposition Program

ConocoPhillips has been executing a definitive asset disposition strategy to pay off its debt and initiate share repurchases and general corporate purposes. In FY16, the Company generated approximately $1.3 billion of proceeds from asset dispositions according to the update released on December 14, 2016. The FY16 production associated with the assets sold was 27 thousand Boe/d, where the proceeds from the transaction enabled the Company to pay down $1.25 billion of debt in October 2016.

The assets being sold under this current agreement with Cenovus had a net book value of about $10.9 billion, as of December 31, 2016. The Company expects to record a gain on sale upon closing, anticipated in Q2 FY17. Additionally, ConocoPhillips expects to recognize a financial tax accounting benefit of about $1 billion in Q1 FY17, resulting from the capital gain component of the transaction and recognition of previously unrealizable tax basis.

Stock Performance

At the closing bell, on Thursday, March 30, 2017, ConocoPhillips' stock jumped 8.81%, ending the trading session at $50.00. A total volume of 40.03 million shares were traded at the end of the day, which was higher than the 3-month average volume of 6.94 million shares. In the last six months and previous twelve months, shares of the Company have rallied 19.86% and 27.02%, respectively. The stock currently has a market cap of $62.32 billion and has a dividend yield of 2.12%.

At the close of trading session on Thursday, March 30, 2017, Cenovus Energy's stock price tumbled 13.69% to end the day at $11.29. A total volume of 45.04 million shares were exchanged during the session, which was above the 3-month average volume of 1.99 million shares. At Thursday's closing price, the stock's net capitalization stands at $9.41 billion. The dividend yield for the stock was 1.33%.

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SOURCE: Active Wall Street