Cenovus Energy Inc. has announced a $1.9-billion deal to divest half of its ownership in two U.S. refineries to Phillips 66, its joint-venture partner. The move is in line with Cenovus’ strategic focus on core assets, according to CEO Jon McKenzie. Following the sale of its 50% stake in WRB Refining LP, Cenovus will retain refining assets that are closely integrated with its oilsands operations in Alberta.
McKenzie stated that the proceeds from the transaction will enable the company to enhance shareholder returns in the near future. The refineries in Wood River, Illinois, and Borger, Texas, have a combined daily production capacity of 495,000 barrels, with Cenovus holding 247,500 barrels.
Upon completion of the deal, Cenovus anticipates that its downstream business will have a total crude processing capacity of 472,800 barrels per day. This includes a refinery and oilsands upgrader in Lloydminster, along with two refineries in Ohio and one in Wisconsin. The transaction is slated to close by the end of the third quarter, pending customary closing conditions.
On the stock market, Cenovus shares saw a 2.6% increase to $22.70 on the Toronto Stock Exchange following the announcement. The refinery sale coincides with Cenovus’ bid to acquire MEG Energy Inc., a smaller oilsands competitor, for nearly $8 billion, including assumed debt. Both companies operate adjacent facilities at Christina Lake in Alberta and have highlighted potential synergies from a merger.
While MEG has accepted Cenovus’ friendly offer, it also faces a hostile all-stock bid from Strathcona Resources, another player in the oilsands sector. Strathcona’s revised offer was approximately 11% higher per share than Cenovus’ bid before the announcement on Monday.
