Cenovus CEO defends much-criticized $17.7B ConocoPhillips deal

A $17.7-billion megadeal to buy most of the Canadian assets of ConocoPhillips will make Cenovus Energy Inc. a "better and stronger company," CEO Brian Ferguson said Wednesday in a staunch response to the deal's critics.

Calgary-based Cenovus's share price has fallen more than 18 per cent since the acquisition was announced March 29 and an investor, Toronto-based Coerente Capital Management, has asked the Ontario Securities Commission to halt the deal.

Coerente wants to put the decision to a shareholder vote because it dilutes the existing shareholders' float by more than 25 per cent.

But Ferguson said Wednesday morning on a conference call with analysts, ahead of the company's annual meeting, that the price and structure of the deal are appropriate.

"I believe it is the right transaction for us and that we have structured the transaction in the right way to maintain our financial strength," he said.

"I don't know specifically what's been asked of the Ontario Securities Commission but I would just emphasize that the transaction was undertaken in full compliance with all securities regulations."

Ferguson added that shareholders could hold the Cenovus management and board accountable at annual general meeting, set for Wednesday afternoon in Calgary.

In an email on Tuesday, Len Racioppo, Coerente's managing director, confirmed the letter had been filed with the commission.

He added he would not attend the company's annual meeting in Calgary but had already voted by proxy against all but two of the 11 nominees for the Cenovus's board.

Cenovus is buying Houston-based ConocoPhillips's 50 per cent interest in the FCCL Partnership, an oilsands venture between the two companies in northern Alberta, as well as most of its Deep Basin conventional assets in Alberta and British Columbia.

The price includes $14.1 billion in cash and 208 million Cenovus common shares. Part of the cash has been raised by selling 188 million shares for $3 billion.

It also plans to raise at least $3.6 billion from dispositions by the end of the year and may sell other non-core assets.

Ferguson said Cenovus is finding plenty of buyer interest in its legacy Alberta conventional assets at Pelican Lake and Suffield.

Deal to close by June 30 

The ConocoPhillips deal is expected to close by June 30.

Cenovus reported oilsands production in northern Alberta rose 32 per cent in the first quarter ended March 31 from the same time last year as volumes ramped up from two new oilsands expansion projects.

Higher prices helped to fuel a nearly $1.7-billion rise in revenue from a year earlier to $3.87 billion — Cenovus's average crude oil sales price was C$41.41 per barrel in the first quarter, up from $15.97 in the same period of 2016 when benchmark oil prices touched 13-year lows.

It reported a net profit of $211 million or 25 cents per share versus a net loss of $118 million or 14 cents in the year-earlier quarter.

Its operating loss was five cents per share, while analysts on average were estimating a loss of eight cents per share, according to Thomson Reuters.