Cenovus to replace CEO, plans asset sales after unpopular deal

CALGARY, Alberta (Reuters) - Cenovus Energy Inc said on Tuesday it would replace Chief Executive Brian Ferguson, who championed an unpopular purchase of western Canadian oil sands assets, and its shares tumbled nearly 9 percent.

FILE PHOTO: President and CEO Brian Ferguson of Cenovus Energy addresses shareholders during the company's annual general meeting in Calgary, Alberta, April 29, 2015. REUTERS/Todd Korol

Ferguson will remain CEO until October while Cenovus searches for a new leader, then stay on in an advisory role until March 2018, the company said.

It was the stock’s biggest one-day percentage decline since March, when Cenovus announced plans to spend $13.3 billion to buy the oil-sands assets from ConocoPhillips in a deal that doubled the company’s size.

The company’s decision to announce Ferguson’s departure without naming his successor upset investors looking for quick change at Cenovus.

“There’s no natural heir, they have not done a very good job of succession planning,” said Laura Lau, senior portfolio manager at Brompton Group, which owns Cenovus shares. “Unfortunately he is almost a lame duck.”

Investors have rejected Ferguson’s rationale for expanding in Canada’s high-cost oil sands at a time when global crude prices remain weak and international energy firms are exiting the region. They complained the deal saddled Cenovus’ pristine balance sheet with debt and brought it into natural gas operations, an area where the company has no experience.

“It has gone from bad to worse for these guys,” said Brian Pow, analyst at Acumen Capital Partners in Calgary. “What they thought was a great acquisition three months ago is turning out to look like it was bought at the top of the market.”

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Cenovus closed down 84 cents at C$9.44 after hitting a record low of C$9.11. The company has lost about half, or $7 billion, of its market value since it announced the ConocoPhillips deal in March.

The decline in Cenovus outpaced decreases in the overall energy sector, which sank as oil prices fell to a seven-month low, dropping below $43 a barrel.

The Toronto Stock Exchange’s energy group index fell 2.5 percent to its lowest since April 2016.

Also on Tuesday, Cenovus unveiled plans to ramp up divestitures and sell C$4 billion to C$5 billion in non-core assets to reduce debt. Previously the company said it would offload about C$3.6 billion of assets including its Pelican Lake and Suffield conventional oil and gas assets.

The company said it may also sell part of the Deep Basin gas field it acquired from ConocoPhillips and Marten Hills oil assets.

Ferguson told an investors meeting in Toronto that he is also looking to sell its Palliser and Weyburn conventional oil projects in a deal that could be announced in the fourth quarter.

Cenovus has said the deal would allow it to utilize economies of scale to lower costs, and on Tuesday it said it will achieve C$1 billion in cost savings.

Ferguson told reporters after the meeting that the company may cut some jobs as part of the cost reduction measures and divestitures. He did not provide specific numbers.

($1 = 1.3279 Canadian dollars)

Additional reporting by Yashaswini Swamynathan in Bengaluru, and Fergal Smith and Solarina Ho in Toronto; Editing by Matthew Lewis and Leslie Adler