According to a report by Reuters, ConocoPhillips is in talks with investment banks in preparation for the sale of its $2.6 billion stake in Cenovus Energy, a major Alberta oil sands company. Cenovus photo.

Cenovus shares drop over 5 per cent Monday

According to a report by Reuters, ConocoPhillips is planning to sell its $2.6 billion stake in Cenovus Energy which was acquired as part of an asset sale to the Cenovus last year.

In the $17 billion deal last year, ConocoPhillips sold oil sands and natural gas assets in exchange for 208 million shares of the Canadian oil and gas company as well as $14.1 billion in cash.

As a result, ConocoPhillips became the largest investor in the Cenovus, but ConocoPhillips said it would not be a long-term investor.

To prepare for the sale, ConocoPhillips has held discussions on appointing advisors on the sale with investment banks.  The company could offer the shares to institutional investors this month, said Reuters’ sources.  They added the timing of the sale could change, depending on market conditions.

If the sale is not complete by the end of June, Reuters’ sources say ConocoPhillips may hold off until investors return from summer vacations in September.

The $2.6 billion stake is valued at current Cenovus share prices, but it is expected ConocoPhillips will sell off the shares at a small discount.  Even with the markdown, the sale would be one of the biggest Canadian equity shares in 2018.

The sale of Cenovus’ shares is part of ConocoPhillips’ plan to sell assets and cut costs to reduce debt and boost its dividend.  Since the first quarter of 2016, the company has cut its debt load by 42 per cent to $17.04 billion.

Both companies declined to comment on the sale.

Shares in the Calgary-based company dropped by 5.73 per cent by 4:15 p.m., EDT.

Last month, Royal Dutch Shell sold its entire stake in CNRL for $3.3 billion.