Debt-laden producer tests appetite for conventional assets as it pivots harder to oil sands
Cenovus Energy may unload up to $3bn of Deep Basin assets as it hunts for ways to bring down a swollen debt load from its takeover of MEG Energy, according to an exclusive by Reuters.
The Canadian producer has sounded out potential buyers in recent weeks for conventional oil and gas properties in Alberta’s Deep Basin, Reuters reported, citing two unnamed sources familiar with the talks.
The review is still at an early stage and Cenovus could choose to keep the assets, the sources said.
They requested anonymity because they were discussing confidential details, and Cenovus did not immediately respond to a request for comment.
Cenovus wants to sharpen its focus on its core oil sands business after its US$8.5bn acquisition of MEG Energy in November, when it gained the smaller rival’s coveted Christina Lake project following a bitter takeover battle with Adam Waterous’ Strathcona Resources.
The company said last month it plans to invest up to $3.6bn in its oil sands business this year, up from as much as $2.8bn in its 2025 budget.
Its conventional segment, which includes the Deep Basin, is set to receive up to $500m in 2026, compared with as much as $400m last year.
Balance sheet repair is central to the story.
Net debt at the Calgary-headquartered producer climbed to around $10.7bn after the MEG Energy deal, as Cenovus assumed about $800m of MEG’s debt and took out a $2.7bn loan to help fund the transaction, based on Morningstar DBRS estimates cited by Reuters.
Cenovus has told investors it aims to bring net debt down to $4bn over time, and proceeds from a Deep Basin sale could move it closer to that target.
The Deep Basin, which straddles Alberta and British Columbia northeast of the Rocky Mountain belt, is a conventional, natural gas-heavy formation.
Conventional oil and gas assets generally refer to mature, well-established fields that do not require complex drilling technologies but face steadily declining output.
Cenovus last month forecast that production from its conventional assets would average up to 125,000 barrels of oil equivalent per day in 2026, and its conventional portfolio also includes holdings in the Montney and Rainbow Lake regions of Canada.
