Cenovus Energy Inc. CVE announced that it would acquire the remaining 50% interest in the Sunrise oil-sand project in Canada from BP Plc BP.
The transaction involves a cash consideration of $600 million and a variable payment of $600 million expiring after two years. The acquisition will strengthen Cenovus’ position in the oil-sand industry.
The Sunrise oil-sand project currently produces 50,000 barrels per day (bpd). Cenovus, the project’s operator, expects to achieve a production capacity of 60,000 bpd through a multi-year development program. As part of the agreement, Cenovus will give up its 35% interest in Canada’s Bay du Nord oil project to BP.
The acquisition will add to BP’s massive acreage position offshore Newfoundland and Labrador. The company currently owns an interest in six exploration licenses in the offshore Newfoundland region. Bay du Nord will add significant acreage and a discovered resource to BP’s existing portfolio in Newfoundland and Labrador.
The divestiture fits well with BP’s strategy to eliminate carbon-intensive projects in response to the growing urgency to curb climate change. Following the deal closure, BP will no longer have interests in Canada’s oil-sand production. The company seeks to reduce its total hydrocarbon production by 40% by 2030. It will focus on resilient hydrocarbons with a lower cost and carbon footprint.
The acquisition enables Cenovus to gain from the significant optimization opportunities that are available. With its cutting-edge operating methods, Cenovus expects to increase production at Sunrise, while reducing sustaining capital, operating expenses and emission intensity.
The transaction, subject to closing conditions and normal purchase price adjustments, is expected to complete in the third quarter of 2022.
Company Profile & Price Performance
Headquartered in Calgary, AB, Cenovus is a leading integrated energy company.
Shares of the company have outperformed the industry in the past six months. Its stock has gained 91.8% compared with the industry’s 79.9% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Cenovus currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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