ConocoPhillips plans to sell its stake in a Canadian oil sands project and separate natural gas assets for $13.3 billion to Canadian producer Cenovus Energy, the company said Wednesday.
The Houston driller is selling its 50-percent share in the Forest Creek Christina Lake oil sands partnership, a 21-year-old project that pumps steam underground to extract viscous oil from nearly 1,500 feet in the earth. Cenovus owns the other half of the project, which produced 70,000 barrels of oil a day last year.
Conoco also plans to sell its natural gas assets in western Canada’s Deep Basin in Alberta and British Columbia, where it owns some 1.3 million net acres of land. The company wants to pay down its debt to $20 billion this year and increase the amount of shares it can repurchase from stockholders.
The deal, expected to close in the second quarter, is part of a strategy to pay down debt with asset sales, while “returning cash to shareholders,” Conoco CEO Ryan Lance said in a statement.
“This transaction significantly accelerates those efforts and provides an important catalyst that should allow investors to have clarity and confidence in our future direction,” Ryan said.
Cenovus will pay Conoco $10.6 billion in cash and $2.7 billion in shares, along with five years of contingent payments when Canadian oil prices rise above a certain level.
Conoco isn’t jettisoning all of its businesses in Canada. It plans to keep its Surmont oil sands joint venture, another steam-related oil operation that started producing thick crude in September 2015, as well as acreage elsewhere.