Cenovus Energy Inc. on Tuesday said it agreed to sell its
oil-and-gas royalty business to Ontario Teachers' Pension Plan for
about 3.3 billion Canadian dollars (US$2.7 billion).
The business, Heritage Royalty L.P., holds about 4.8 million
acres of royalty interest and mineral fee title lands in Alberta,
Saskatchewan and Manitoba. Cenovus has been exploring alternatives
for the business, including an initial public offering, for several
months.
Cenovus Chief Executive Brian Ferguson said the sale will
provide "greater resilience during these uncertain times."
Oil-sands producer Cenovus, like other companies in Canada's oil
patch, has been cutting costs and searching for ways to boost its
bottom line amid slumping oil prices.
Cenovus said in April it was considering plans to sell or spin
off its oil-and-gas royalty business. Recent media reports had said
the Calgary, Alberta, company was in talks with the pension giant,
which manages assets on behalf of teachers in the province of
Ontario.
For its part, Toronto-based Teachers', which oversees more than
C$154 billion in assets, said the deal will provide a hedge against
unexpected inflation.
"(Heritage) has strong assets and operating partners generating
recurring revenues that are an excellent fit with Teachers' need to
pay pensions for the long term," the fund said.
Heritage has about 40 employees and had annual revenue in 2014
of around C$320 million, based on average production of about
14,800 barrels of oil equivalent a day.
The deal is expected to close by the end of July.
Judy McKinnon contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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