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Cenovus sells equity to fund oils sands projects in Canada

18th February 2015

Cenovus Energy has entered into a bought-deal financing agreement to sell 67.5 million common shares at a price of CAD 22.25 per share which could see the company raise over CAD 1.5bn (USD 1.21bn) to proceed with its Foster Creek oil sands development

Cenovus Energy has entered into a bought-deal financing agreement to sell 67.5 million common shares at a price of CAD 22.25 per share which could see the company raise over CAD 1.5bn (USD 1.21bn) to proceed with its Foster Creek oil sands development
The Christina Lake project uses steam-assisted gravity drainage (SAGD) to drill wells, inject steam at a low-pressure and pump oil to the surface. Source: Cenovus

The net proceeds of the offering, combined with the company’s CAD 3bn of undrawn committed credit lines, provide Cenovus with a stronger balance sheet and financial flexibility to pursue its planned capital programme.

Cenovus intends to use the net proceeds from the offering to partially fund the company’s previously announced CAD 1.8bn to CAD 2.0bn capital expenditure programme for 2015, repay commercial paper outstanding as it matures, and for general corporate purposes.

The company’s 2015 capital expenditure program includes forecast investment of between CAD 550m and CAD 600m at its Foster Creek oil sands project to fund the continued construction of the phase G expansion and to maintain existing operations. Phase G is expected to add initial design capacity of 30,000 gross barrels per day (bbls/d), with production anticipated in the first half of 2016.

At the company’s Christina Lake oil sands project, forecast capital expenditures include between CAD 650m and CAD 700m to fund the continued construction of the phase F expansion, an optimisation programme, and to maintain existing operations.

Phase F is expected to add design capacity of 50,000 gross bbls/d in the second half of 2016 and the optimization program is expected to add design capacity of 22,000 gross bbls/d in the fourth quarter of 2015. Cenovus has a 50 per cent working interest in each of Foster Creek and Christina Lake.

The offering will be made through a syndicate of underwriters led by RBC Capital Markets and TD Securities Inc. The gross proceeds from the offering are expected to be about CAD 1.5 billion. The offering is subject to customary closing conditions, including receipt of applicable regulatory and stock exchange approvals, and is expected to close on or about March 3, 2015.

Cenovus has granted the underwriters an Over-Allotment Option to purchase up to an additional 10.125 million common shares at the offering price, exercisable for a period of 30 days after closing. If the Over-Allotment Option is exercised in full, the gross proceeds from the offering are expected to be about CAD 1.73bn.

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