Headwater will now a 100% working interest in approximately 2,800 barrels per day of medium gravity oil production


Cenovus completes sale of oil assets in Canada to Headwater. (Credit: Pixabay/RJA1988.)

Cenovus Energy has completed the sale of its oil assets in the Marten Hills area of Alberta, Canada to Headwater Exploration for C$100m ($77.38m).

Through the acquisition, Headwater will now a 100% working interest in approximately 2,800 barrels per day of medium gravity oil production and 270 net sections of Clearwater rights.

The total consideration includes C$35m ($27.08m) in cash, 50 million common shares of Headwater and 15 million purchase warrants at C$2 ($1.55) per common share with a three-year term.

In addition to the consideration, Headwater has also agreed for a Gross Overriding Royalty (GORR) agreement to allow Cenovus to benefit from future development of the Clearwater formation at Marten Hills.

Headwater has agreed to invest at least C$100m ($77.38m) on the acquired lands by the end of 2022.

The sale was first announced last month. As a result of the transaction, Cenovus now owns 50 million shares in Headwater, which is equal to 25.6% of the company’s issued and outstanding common shares.

Headwater chairman and CEO Neil Roszell said: “With the strong support received from Cenovus, the Headwater team has been able to prepare for an active 2021 development program. The unique high-return assets acquired will provide the catalyst for the next stage of our corporate evolution.

“With Cenovus as a strategic investor and Kam and Sarah adding to the skills and experience of our already strong Board, we are well-positioned for success as a premier publicly traded oil and gas producer focused on asset quality, corporate level returns and sustainability while maintaining a pristine balance sheet.”

Simultaneous to the transaction’s closure, Cenovus conventional senior vice-president, Kam Sandhar and Cenovus corporate services senior vice-president Sarah Walters, have been appointed to Headwater’s board of directors.

Sandhar said: “We look forward to working with Headwater’s highly respected management team as they begin to develop these top-quality oil assets at Marten Hills.

“This is a unique opportunity to get capital and expertise to work right away on a promising portfolio that was unlikely to receive near-term funding from Cenovus, and we believe the closing of this transaction will provide compelling long-term value for Cenovus shareholders.”