CVE - Cenovus acquires oil sands assets from BP on the cheap

Cenovus (CVE) announced Monday the acquisition of a 50% interest in the Sunrise oil sands project from BP (BP). Cenovus already owns the other 50% of the project and operates the asset. The company will pay BP (BP) C$600m up front, with a C$600m max earnout, and swap a 35% stake in the undeveloped Bay du Nord project. At ~50kb/d of production gross, Cenovus (CVE) is paying ~$19k per flowing barrel, or around ~$38k per flowing barrel assuming the full earnout is reached; excluding the value of the Bay du Nord project. MEG (OTCPK:MEGEF) has a total enterprise value of ~$7.1b and produces ~101kb/d, for a valuation of ~$69k per flowing barrel, suggesting Cenovus (CVE) received a competitive price for comparable assets. Strategically, the acquisition makes sense and it appears management paid a fair price; in the short term, investors may push back, given that the cash payment could delay

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Cenovus acquires oil sands assets from BP on the cheap