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Cenovus Seeks Another Partner for Oil Sands

Source: Reuters 2/18/2011, Location: North America

Cenovus Energy Inc, Canada's No. 2 independent oil exploration and production company, said it's seeking a joint-venture partner to speed development of its Alberta oil sands holdings and boost the value of its reserves.

The company, which reported a 17 percent drop in its fourth-quarter operating profit, said it has been approached by several would-be partners and plans to launch a competitive process that could see a deal close by year-end.

"We literally have decades and decades of growth opportunities in front of us," Brian Ferguson, the company's chief executive, said in an interview. "One of my obligations ... is to find ways to realize some of that value in a more current time frame."

A number of Canadian oil and gas producers have recruited joint-venture partners over the past year to raise the capital to speed development of reserves that could otherwise sit idle.

The largest such deal came earlier this month, when Encana Corp sold a half stake in its Cutbank Ridge shale gas assets to PetroChina for C$5.4 billion ($5.5 billion), the largest foreign gas deal by a Chinese company.

Cenovus paid particular attention to a deal last November in which Thailand's PTT Exploration and Production acquired 40 percent of Statoil's Alberta oil sands project for $2.3 billion.

John Brannan, Cenovus's chief operating officer, said the company has oil sands properties near Statoil's project that aren't being valued by investors.

"They hardly give us any value for our properties in that area," he said. "We have the opportunity to grow the value of that particular position if we could get the dollars that they got in the Statoil deal."

Ferguson said Cenovus doesn't plan to set a limit on the size of any joint-venture deal.

Cenovus already has a oil sands production and refining joint venture in place. It shares ownership of its Foster Creek and Christina Lake oil sands projects with ConocoPhillips and has a half interest in Conoco's Wood River, Illinois, and Borger, Texas, refineries.

RESERVES RISE

The company, which is best known for its steam-driven oil sands projects in Alberta, also said its share of fourth-quarter production at its Foster Creek and Christina Lake oil sands was up 12 percent to 60,789 barrels per day before royalties.

It expects production of 56,000 bpd net from Foster Creek, and 16,000 bpd net at Christina Lake, this year.

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