Cenovus Energy Inc. has announced a $1.9 billion deal to divest half of its ownership in two U.S. refineries to joint-venture partner Phillips 66, as part of its strategy to focus on core assets. The company’s CEO, Jon McKenzie, stated that this move aligns with their goal of owning and operating key assets.
Following the sale of its 50% stake in WRB Refining LP, Cenovus will retain a refining business consisting of assets that it manages and are closely connected to its extensive oilsands operations in Alberta. McKenzie highlighted that the proceeds from this transaction will enable the acceleration of shareholder returns in the near future.
The refineries in Wood River, Illinois, and Borger, Texas, have a combined daily capacity of 495,000 barrels, of which 247,500 belong to Cenovus. Post-deal closure, Cenovus anticipates its downstream business will have a total crude throughput capacity of 472,800 barrels per day. This segment will continue to include a refinery and oilsands upgrader in Lloydminster, along with two refineries in Ohio and one in Wisconsin.
The transaction is anticipated to be finalized by the end of the third quarter, pending customary closing conditions. Cenovus shares saw a 2.6% increase to $22.70 on the Toronto Stock Exchange during late morning trading.
This refinery sale coincides with Cenovus’ bid to acquire MEG Energy Inc., its smaller oilsands counterpart, in a deal valued at nearly $8 billion. Both companies operate near each other at Christina Lake, south of Fort McMurray, Alberta, and have highlighted potential cost savings and operational efficiencies through the merger.
MEG has accepted Cenovus’ friendly offer, although it faces a competing all-stock bid from Strathcona Resources, another oilsands player. Strathcona’s revised offer, announced on Monday, was approximately 11% higher on a per-share basis compared to Cenovus’ bid before the announcement.