Cenovus to sell its Palliser assets in Alberta for $1.3 billion (Can.)

Cenovus Energy Inc., Calgary, has agreed to sell its Palliser crude oil and natural gas assets in southeastern Alberta to Torxen Energy and Schlumberger Ltd. for $1.3 billion (Can.) in cash.

Cenovus Energy Inc., Calgary, has agreed to sell its Palliser crude oil and natural gas assets in southeastern Alberta to Torxen Energy and Schlumberger Ltd. for $1.3 billion (Can.) in cash.

The Palliser block consists of oil and gas wells, surface facilities, a pipeline network, and 800,000 acres of oil and gas development rights, with current production of 54,000 boe/d. The block borders acreage awarded to a joint venture of Schlumberger Production Management (SPM) and Torxen that was established earlier this year.

Schlumberger will be the majority nonoperating owner of the assets while Torxen will be the operator. The recently formed, privately held Torxen of Calgary is led by Pres. and Chief Executive Officer John Brannan, the former long-time chief operating officer of Cenovus.

The partners’ oil-focused development strategy for the acquired properties includes a multiyear drilling program of more than 1,600 oil wells starting in 2018.

“By leveraging our reservoir knowledge, oil field 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,” commented Patrick Schorn, Schlumberger executive vice-president, new ventures.

Cenovus at the end of the first quarter reported a crude oil production increase from the block of 1,300-b/d, with incremental volumes reaching 3,300 b/d, resulting from the completion of wells drilled in 2016 and first-quarter drilling.

Cenovus advances divestments

Cenovus suspended Palliser drilling after the first quarter as it sought to sell the assets following the firm’s $17.7-billion (Can.) agreement to buy ConocoPhillips’ half of the firms’ Foster Creek Christina Lake oil sands partnership and most of its Deep basin conventional assets in Alberta and British Columbia (OGJ Online, Mar. 30, 2017).

Including the Palliser deal, which is expected to close in the fourth quarter, Cenovus has struck about $2.8 billion (Can.) in noncore divestments since the ConocoPhillips deal was completed in May. The company is using the proceeds to pay off a $3.6-billion asset-sale bridge facility used for the purchase.

Cenovus’s sale of northern Alberta assets, including its Pelican Lake heavy oil operations, to Canadian Natural Resources Ltd. closed on Sept. 29 (OGJ Online, Sept. 5, 2017).

Also last month, the firm reported an agreement to sell its interests in its Suffield and Alderson conventional oil and gas areas of southern Alberta to International Petroleum Corp. (OGJ Online, Sept. 26, 2017). Prior to the deal being announced, Torxen was said to be a frontrunner for the Suffield asset.

Cenovus continues to target $4-5 billion in sale agreements by the end of the year. The firm says its expects to reach an agreement to sell its Weyburn carbon-dioxide enhanced oil recovery operation in Saskatchewan in the fourth quarter. The firm also has other noncore assets being evaluated for potential sale.

Contact Matt Zborowski at matthewz@ogjonline.com.

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