Cenovus Energy Inc will seek on Tuesday to convince investors of the value of an unpopular acquisition this year amid continuing skepticism from shareholders.
At an annual investor event in Toronto, Chief Executive Brian Ferguson is expected to unveil plans for asset sales to cut debt assumed for the C$17 billion ($12.9 billion) March purchase of some ConocoPhillips (COP)
assets in Canada.
The deal effectively doubled Cenovus' assets, a move the company has said would allow it to utilize economies of scale to lower costs. Cenovus shares have since fallen about 40 percent to just above C$10, wiping out $6.7 billion in the company's market value.
Two months after the deal is too soon to realize any benefits of the acquisition, and shareholders lack faith in management's ability to deliver, Laura Lau, senior vice president at Toronto-based Brompton Group, said in an interview. Brompton holds 183,800 Cenovus shares.
"They're not going to give them the benefit of the doubt," Lau said.
She said the same goes for asset sales. "It's too soon to actually know," she said. "What's probably likely is: 'We've put the package out. These are the packages, and these are the possible bids.'"
When asked about investors' skepticism, Cenovus spokesman Brett Harris said, "With respect to our conversations with individual investors, that's not something we would discuss publicly."
Cenovus expects a "fulsome discussion" about the acquired assets and the company's longer-term outlook on Tuesday, Harris said without providing additional details.
Royal Bank of Canada analyst
Greg Pardy said in a note on Monday that questions from investors had increased over the past month, with the most significant being whether Cenovus can achieve its asset-sale target.
Cenovus has said it wants to raise C$3.6 billion by selling its Pelican Lake and Suffield oil assets and potentially others, including parts of its Deep Basin gas play, newly acquired from ConocoPhillips, which had been unpopular among investors who saw it as unwanted diversification.
"Most people view they overpaid for the assets, and now two months later, we're sitting with higher interest rates and oil prices that are 10 percent lower," said Len Racioppo, managing director of Toronto-based Coerente Capital Management.
"They say they want to sell assets, but how do you sell assets and what kind of a price do you get when you bought them at $50-something a barrel, and now we're at $45 a barrel?" Racioppo said.
Racioppo wrote to the Toronto Stock Exchange's regulator seeking to halt the deal soon after it was announced. He manages more than 500,000 shares on clients' behalf.
Cenovus spokesman Harris said the company had invited its 100 largest shareholders to Tuesday's event, and Coerente was not among them.
"We can only have so many people attend the event in person. In fact, we have a waiting list, which is why we’re also webcasting the event," Harris said.
By Ethan Lou