Cenovus to replace CEO, plans asset sales after unpopular deal


Reuters

UPDATE 7-Cenovus to replace CEO, plans asset sales after unpopular deal


(Adds closing share price, Breakingviews link)
    By Ethan Lou and Nia WilliamsCALGARY, Alberta, June 20 (Reuters) - Cenovus Energy Inc
<CVE.TO> said on Tuesday it would replace Chief Executive Brian
Ferguson, who championed an unpopular purchase of western
Canadian oil sands assets, and its shares tumbled nearly 9
percent.
    Ferguson will remain CEO until October while Cenovus
searches for a new leader, then stay on in an advisory role
until March 2018, the company said.
    It was the stock's biggest one-day percentage decline since
March, when Cenovus announced plans to spend $13.3 billion to
buy the oil-sands assets from ConocoPhillips in a deal that
doubled the company's size.
    The company's decision to announce Ferguson's departure
without naming his successor upset investors looking for quick
change at Cenovus.
    "There's no natural heir, they have not done a very good job
of succession planning," said Laura Lau, senior portfolio
manager at Brompton Group, which owns Cenovus shares.
"Unfortunately he is almost a lame duck."
    Investors have rejected Ferguson's rationale for expanding
in Canada's high-cost oil sands at a time when global crude
prices remain weak and international energy firms are exiting
the region. They complained the deal saddled Cenovus' pristine
balance sheet with debt and brought it into natural gas
operations, an area where the company has no experience.
    "It has gone from bad to worse for these guys," said Brian
Pow, analyst at Acumen Capital Partners in Calgary. "What they
thought was a great acquisition three months ago is turning out
to look like it was bought at the top of the market."

    OIL PRICES
    Cenovus closed down 84 cents at C$9.44 after hitting a
record low of C$9.11. The company has lost about half, or $7
billion, of its market value since it announced the
ConocoPhillips deal in March. [nL1N1JD12T]
    The decline in Cenovus outpaced decreases in the overall
energy sector, which sank as oil prices fell to a seven-month
low, dropping below $43 a barrel <CLc1>.
    The Toronto Stock Exchange's energy group index <.SPTTEN>
fell 2.5 percent to its lowest since April 2016.
    Also on Tuesday, Cenovus  unveiled plans to ramp up
divestitures and sell C$4 billion to C$5 billion in non-core
assets to reduce debt. Previously the company said it would
offload about C$3.6 billion of assets including its Pelican Lake
and Suffield conventional oil and gas assets.
    The company said it may also sell part of the Deep Basin gas
field it acquired from ConocoPhillips and Marten Hills oil
assets.
    Ferguson told an investors meeting in Toronto that he is
also looking to sell its Palliser and Weyburn conventional oil
projects in a deal that could be announced in the fourth
quarter.
    Cenovus has said the deal would allow it to utilize
economies of scale to lower costs, and on Tuesday it said it
will achieve C$1 billion in cost savings.
    Ferguson told reporters after the meeting that the company
may cut some jobs as part of the cost reduction measures and
divestitures. He did not provide specific numbers.

 ($1 = 1.3279 Canadian dollars)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
BREAKINGVIEWS-Cenovus fiasco a leverage warning for oil sector
 [nL1N1JH0ND]
Graphic-Cenovus Energy's market capitalization    http://reut.rs/2rQspdH
INSIGHT-Innovators toil to revive Canada oil sands as majors
exit    [nL1N1JF0B6]
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Yashaswini Swamynathan in Bengaluru,
and Fergal Smith and Solarina Ho in Toronto; Editing by Matthew
Lewis and Leslie Adler)
 ((Ethan.Lou@thomsonreuters.com; +1-403-531-1634, Reuters
Messaging: ethan.lou.thomsonreuters.com@reuters.net))

Keywords: CENOVUS ENERGY CEO/ (UPDATE 7, PIX, GRAPHIC)



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