Cenovus reaches key debt reduction milestone with $940 million deal to sell Weyburn project

Pumpjacks producing from CO2 flood operations near Weyburn, Saskatchewan. Image: Joey Podlubny/JWN

Cenovus Energy has taken a big step closer to reaching its divestiture target of up to $5 billion this year with a $940-million agreement to sell its Weyburn project in Saskatchewan to Whitecap Resources.

The deal ratchets up expected 2017 divestment proceeds to $3.7 billion, which CEO Alex Pourbaix noted is enough for the company to retire the entire $3.6-billion bridge facility associated with its $17.7-billion asset purchase from ConocoPhillips earlier this year.

In recent months Cenovus has closed the $975 million sale of its Pelican heavy oil operations and announced deals for Suffield ($512 million) and Palliser ($1.3 billion). The company says it expects the latter two deals, as well as the Weyburn transaction, to close before the end of the year.

Cenovus also stated recently that it would look to divest of “non-core” Deep Basin natural gas assets that came as part of the ConocoPhillips deal before year end.

The Weyburn CO2 flood currently produces about 11,500 boe/d.

Whitecap says the project is appealing as a self-sustaining operation that generates strong free funds flow even in a low commodity price environment, requiring minimal capital investment to maintain production volumes and associated funds flow.

The company says that over the next five years there is also potential to increase production to about 17,700 boe/d.