International Petroleum Corporation (IPC) has announced that a wholly owned subsidiary of IPC has entered into an agreement with Cenovus Energy Inc. to acquire all of Cenovus’ interests in the conventional oil and natural gas assets in the Suffield and Alderson areas of southern Alberta, Canada. The purchase consideration for the Acquisition is CAD 512 million (CAD 12 million will be payable at end June 2018), subject to closing adjustments and to certain additional contingent consideration, and is expected to be fully funded by IPC through debt financing. All amounts are in Canadian dollars unless otherwise noted.

Mike Nicholson, CEO comments, “We are very excited to enter into this transformational acquisition of high quality operated assets only five months after the launch of IPC. The Suffield and Alderson assets have been operated safely and efficiently by Cenovus and we are pleased to have reached this agreement to acquire these conventional producing assets as Cenovus focuses on its oil sands and Deep Basin assets. This acquisition fits perfectly with IPC’s strategy of leveraging our existing producing asset base as a platform for value accretive acquisitions of long-life, low-decline producing assets in stable jurisdictions with upside development potential.”

The Suffield and Alderson oil and natural gas assets are held over a large, contiguous land position of 800,000 net acres of shallow natural gas rights and 100,000 net acres of oil rights in southern Alberta. IPC has agreed to acquire 100% operatorship (98.8% working interest) in the oil and natural gas assets which are forecast to produce an average of approximately 6,900 barrels of oil per day (bopd) and approximately 102 million standard cubic feet of natural gas per day during 2017, for a total average of approximately 24,000 barrels of oil equivalent per day (boepd). These producing fields have low production costs and significant future development potential from a combination of low risk development drilling, well stimulation and enhanced oil recovery (EOR) opportunities, which have not been undertaken for a number of years due to Cenovus’ capital allocation priorities.

In conjunction with the Acquisition, IPC has received commitments from BMO Capital Markets for new credit facilities of CAD 325 million in respect of the Suffield and Alderson assets and for an increased reserve-based lending facility of USD 200 million in respect to IPC’s existing international assets.

The Acquisition remains subject to regulatory approvals and is expected to be completed in the fourth quarter of 2017. IPC has also agreed to certain contingent purchase price payments to Cenovus, which may become payable based on increased average oil and natural gas prices during 2018 and 2019. Under the terms of the agreement, IPC will make payments to Cenovus for each month in which the average daily price of West Texas Intermediate (WTI) is above USD 55 per barrel (bbl) or natural gas prices at the Henry Hub are above USD 3.50 per million British thermal units (MMBtu). These payments are capped for each commodity, with a maximum combined payment of CAD 36 million in aggregate.

Tags: Cenovus Energy Inc., International Petroleum Corporation (IPC)