Schlumberger Ltd. Chairman and CEO Paal Kibsgaard.
By Olivia Pulsinelli Senior web editor, Houston Business Journal
Schlumberger Ltd. (NYSE: SLB), which has one of its principal offices in Houston, and Torxen Energy will buy assets in Alberta, Canada, from Cenovus Energy Inc. (NYSE: CVE) for about $1 billion.
According to a press release, Schlumberger will be the majority non-operating owner of the assets, called the Palliser Block, and Canada-based Torxen will be the operator. They plan to focus on oil development and drill more than 1,600 oil wells over multiple years beginning in 2018, per Schlumberger’s release.
The block consists of oil and gas wells, surface facilities, a pipeline network and approximately 800,000 acres of oil and gas development rights. It currently produces about 54,000 barrels of oil equivalent per day and borders acreage that a joint venture between Schlumberger Production Management and Torxen was awarded earlier this year.
“Schlumberger is very pleased to partner with Torxen in the Palliser Block,” Patrick Schorn, executive vice president of new ventures for Schlumberger, said in the release. “By leveraging our reservoir knowledge, oil field services technology and project-management expertise, we expect to lower development costs and maximize the value of this asset — in a market where our traditional business model is challenged to deliver the required financial returns.”
Schlumberger’s release did not discuss funding details for the purchase.
According to a press release from Cenovus, the deal is expected to close in the fourth quarter of this year, and proceeds will be used to pay down debt. It’s the latest in a series of asset sales Cenovus has recently announced or closed, and the company has some other non-core assets that it might consider selling.
“Our strategy to optimize our portfolio by selling non-core assets and using the proceeds to pay down debt is firmly on track,” Brian Ferguson, president and CEO of Cenovus, said in the release. “We continue to target between C$4 billion and C$5 billion in announced asset sale agreements by the end of the year, and we remain committed to returning to our long-term debt ratio target.”
The company has been selling assets to pay off a bridge loan it used to purchase Canadian assets from Houston-based ConocoPhillips (NYSE: COP) earlier this year. That $13.3 billion deal closed in May.
For the Palliser deal, Credit Suisse and Scotiabank acted as financial advisers to Cenovus. Schlumberger did not list its advisers.