Thoughts?
45 replies (most recent on top)
With a weak $44M annualized operating margin CVE got a good price. None of the Deep Basin assets have better internal investment metrics than any of the proposed Oilsands expansions or Martin Hills development under WTI $75. You can expect many more asset sales in DB before this is done.
Alot of junk came with the Deep Basin deal, however, Wembley is a top tier asset. Good on Nuvista for recognizing that.
This is what happens when you bring in a downstream lawyer to run an upstream oil & gas company. At least the accountant we had before AP had some vision and tried to purchase some top tier assets (like Pipestone Montney) to transform and diversify the company. AP will spin this to his benefit with the shareholders, no doubt. However, smart people will read Nuvista's press release and realize Cenovus just gave up a proven top tier asset and eroded serious value for their shareholders. This play had decades of running room, and Nuvista feels the play will generate $400 million of targeted annual adjusted funds flow and almost $200 million of targeted free adjusted funds flow. So for Cenovus to sell it for $625MM seems awfully desperate.
WRONG! Cenovus paid a premium for a PREMIUM asset without fully understanding it. Then, because they can't see the forest for the trees, they rushed to a decision and sold a premium asset (the best asset they have in the Deep Basin by far) in a desperate attempt to pay down some debt. They couldn't get decent offers for any other DB assets, so they had to sell the crown jewel in a desperate attempt by AlPo to deliver on his shortsighted strategy. It's like the guy who buys a Porsche for $100k then can't make the payments, and is so desperate that he is forced to take $62.5k for it to buy himself some time. Of course this a flawed strategy and it's only a matter of time before it catches up with you. On the other side, Nuvista saw blood in the water and they just picked up a premium Montney asset for a great price.
They got a fair price for an asset they otherwise over paid for. The ELT and BoD will use this as an excuse to give themselves a fat bonus.