Cenovus Energy Inc. has announced plans to divest a portion of its refining business through a $1.9 billion agreement to sell 50% ownership in two U.S. refineries to Phillips 66, their joint-venture partner. CEO Jon McKenzie stated that the move is in line with the company’s strategy of retaining core assets. Following the sale of its stake in WRB Refining LP, Cenovus will focus on refining assets under its direct control, closely linked to its expansive oilsands operations in Alberta. McKenzie emphasized that the proceeds from the sale will enable the company to enhance shareholder returns in the short term.
The refineries located in Wood River, Illinois, and Borger, Texas, have a combined daily production capacity of 495,000 barrels, with Cenovus accounting for 247,500 barrels. Post-transaction, Cenovus anticipates a total crude throughput capacity of 472,800 barrels per day within its downstream division. This includes a refinery and oilsands upgrader in Lloydminster, as well as two refineries in Ohio and one in Wisconsin. The deal is projected to close by the end of the third quarter, pending customary approvals.
In response to the news, Cenovus shares experienced a 2.6% increase, reaching $22.70 during late morning trading on the Toronto Stock Exchange. This development coincides with Cenovus’s pursuit of acquiring MEG Energy Inc., a smaller player in the oilsands sector, through an offer totaling nearly $8 billion with debt. Both companies operate adjacent facilities at Christina Lake near Fort McMurray, Alberta, suggesting potential synergies in operations and cost efficiencies through consolidation.
While MEG has accepted Cenovus’s friendly bid, it faces a competing all-stock hostile offer from Strathcona Resources, another oilsands operator. Strathcona’s revised bid, announced on Monday, surpasses Cenovus’s offer by approximately 11% per share. The industry awaits further developments as the consolidation landscape in the oilsands sector continues to evolve.