Cenovus reaches agreement to accelerate Marten Hills development
Cenovus Energy Inc., through a wholly owned partnership, has entered into a definitive agreement to sell its Marten Hills oil assets in northern Alberta to Headwater Exploration Inc. for initial cash and common share equity consideration of approximately $100 million.
Total consideration paid to Cenovus consists of $35 million in cash and 50 million common shares of Headwater, plus 15 million share purchase warrants. Each warrant will entitle the holder to acquire one Headwater common share for a period of three years following the completion of the transaction at an exercise price of $2 per share. Upon closing, Kam Sandhar, Senior Vice-President, Conventional and Sarah Walters, Senior Vice-President, Corporate Services will represent Cenovus on the Board of Directors of Headwater. In addition to the initial consideration, Headwater has agreed to a Gross Overriding Royalty (GORR) agreement that gives Cenovus the opportunity to benefit from future development of the Clearwater formation at Marten Hills. Headwater has committed to spending at least $100 million on the acquired lands by the end of 2022. The sale is expected to close on or about December 22, 2020, subject to customary closing conditions.
"This is a unique opportunity for us to partner with a well-capitalized and highly respected management team to accelerate development at Marten Hills," said Alex Pourbaix, Cenovus President & Chief Executive Officer. "These are high-quality assets that were unlikely to receive near-term funding from Cenovus, and we believe this transaction will provide compelling value for Cenovus shareholders over the long term."
From its initial investment at Marten Hills, Cenovus always kept open the option to either continue developing or divest the asset. Cenovus determined this divestiture was a unique opportunity to accelerate value generated from the Marten Hills assets, particularly in the context of the deferral of exploration and development spending as part of the company's response to lower oil prices resulting from the COVID-19 pandemic.