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Will Cenovus (CVE) Gain From C$625M Pipestone Business Sale?

Zacks Equity Research
Updated

Cenovus Energy Inc. CVE announced plans to divest its Northwestern Alberta-based natural gas rich assets in an effort to trim debt. The transaction is valued at C$625 million and will likely conclude in the September quarter of 2018.  

Although Cenovus Energy has not disclosed the name of the buyer, NuVista Energy Ltd has confirmed the acquisition.

Cenovus added that the to-be-divested Pipestone and Wembley natural gas and liquids business produced 8,800 barrels of oil equivalent per day (BOE/d) through the January-to-June period of 2018. It is to be noted that of the total production, natural gas comprises 55%. Over the same period, the company generated C$22 million of operating margin from Pipestone operations. In the same deal, Cenovus will be selling the 39% stake of the Pipestone business in the Wembley unit that processes natural gas.

Cenovus has been getting rid of properties to strengthen its balance sheet that records total debt of nearly $9 billion as of Jun 30, 2018. Notably, the company significantly levered its balance sheet after acquiring oil sands assets along with natural gas resources in western Canada from ConocoPhillips COP in 2017. Cenovus Energy revealed that it is looking for opportunities to divest other non-core acres in the Deep Basin regions which got sufficient interest from the buyers.

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Calgary, Canada-based Cenovus is a leading integrated energy firm. However, the stock’s 24.1% rally over the past year failed to outperform the 25.9% collective gain of the stocks belonging to the industry.

Presently, the company carries a Zacks Rank #3 (Hold). Meanwhile, two better-ranked players in the energy space are McDermott International, Inc. MDR and Murphy Oil Corp. MUR. While Murphy Oil carries a Zacks Rank #2 (Buy), McDermott sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

McDermott’s earnings surpassed the Zacks Consensus Estimate in the last four quarters, the average positive surprise being 101.7%.

Murphy Oil’s bottom line surpassed the consensus mark in each of the last four quarters, the average positive surprise being 102.5%.

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McDermott International, Inc. (MDR) : Free Stock Analysis Report
 
Cenovus Energy Inc (CVE) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Murphy Oil Corporation (MUR) : Free Stock Analysis Report
 
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Zacks Investment Research