Cenovus raising $1.5B; to sell 67.5 million shares in bought deal financing

CALGARY – Cenovus Energy Inc. (TSX:CVE) is raising $1.5 billion through the sale of 67.5 million common shares in a move aimed at shoring up its balance sheet in the face of oil prices that have fallen to half the level of June.

Proceeds from the sale — a bought-deal financing at a price of $22.25 per share — will partially be used to fund the company’s $1.8-billion to $2-billion capital expenditure program for 2015.

The offering is being made through a syndicate of underwriters led by RBC Capital Markets and TD Securities Inc., the oilsands producer said in a statement Tuesday after markets closed.

Cenovus has granted the underwriters an over-allotment option to purchase up to an additional 10.125 million common shares at the offering price for up to 30 days after closing. If exercised in full, gross proceeds from the offering would be about $1.73 billion.

In addition to helping with its capital expenditures, the proceeds will also be used to repay commercial paper as it matures and for general corporate purposes, the company said.

The offering follows on the heels of an announcement last week that Cenovus was cutting its head count by 15 per cent or about 800 positions, mostly contractors, as it contends with continue lower prices amid a global glut of oil.

The current capital expenditure program of up to $2 billion had been cut by about $700 million in January as the company moved to trim expenses.

“I believe we are in for much greater volatility in oil prices for the foreseeable future and that’s why you’ve seen Cenovus preserve cash by moderating our growth and reducing our workforce,” CEO Brian Ferguson said in announcing the job cuts.

In New York, the March contract for benchmark West Texas Intermediate crude closed up 75 cents at US$53.53 a barrel on Tuesday, but that was still less than half the US$107 it traded for last June.

On the Toronto Stock Exchange, Cenovus shares closed down 89 cents or 3.68 per cent at $23.29.