Cenovus Energy Inc. - President & CEO, Alex Pourbaix
President & CEO, Alex Pourbaix
Source: Bloomberg
  • Shares in Cenovus Energy (CVE) have skyrocketed this morning following a deal to sell its Marten Hills oil assets in northern Alberta to Headwater Exploration
  • Under the terms of the deal, the company will receive an initial consideration from Headwater of roughly C$100 million
  • Headwater has also granted Cenovus a Gross Overriding Royalty on the assets, allowing benefits from future development
  • The company’s Kam Sandhar, Senior Vice-President, and Sarah Walters, Senior Vice-President of Corporate Services, will join Headwater’s Board of Directors
  • Cenovus Energy (CVE) is currently up 14.03 per cent and is trading at $5.32 per share at 10:22am EST

Cenovus Energy (CVE) shares have skyrocketed this morning following the sale of its Marten Hills oil assets to Headwater Exploration.

Under the terms of the agreement, Headwater will acquire a 100 per cent interest in approximately 2,800 barrels per day of medium oil production for roughly C$100 million.

It’s expected that this amount will be comprised of $35 million in cash, 50 million common shares in Headwater, and 15 million purchase warrants exercisable at a price of $2.00 per share for a period of three years.

Upon closing of the deal, which is anticipated on December 22, 2020, Cenovus will own around 26 per cent of Headwater’s issued and outstanding share capital.

Cenovus has also signed a Gross Overriding Royalty agreement with Headwater, which will give the company access to ongoing benefits from future development at the Clearwater formation at Marten Hills. This development work includes a $100 million spending commitment by Headwater before the end of 2022.

In connection with the sale, Cenovus’ Kam Sandhar, Senior Vice-President, and Sarah Walters, Senior Vice-President of Corporate Services, will join Headwater’s Board of Directors.

“This is a unique opportunity for us to partner with a well-capitalised and highly respected management team to accelerate development at Marten Hills,” said Alex Pourbaix, President and CEO of Cenovus Energy.

“These are high-quality assets that were unlikely to receive near-term funding from Cenovus, and we believe this transaction will provide compelling value for Cenovus shareholders over the long term,” he added.

Cenovus said it has always maintained that there was the option to either continue developing or sell-off the Marten Hills assets, and that the decision to pursue the latter came in the context of delayed spending associated with its response to the ongoing oil price crisis.

Cenovus Energy (CVE) is currently up 14.03 per cent to $5.32 per share at 10:22am EST.

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