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Cenovus shares tumble after $17.7-billion ConocoPhillips deal

Workers drive a vehicle past oil production facilities at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, in this file photo.

TODD KOROL/REUTERS

Cenovus Energy Inc. shares tumbled a day after the company agreed to buy most of ConocoPhillips Co.'s oil sands assets in a $17.7-billion cash-and-stock deal.

Shares of the Calgary-based oil sands producer were down more than 13 per cent, falling to around $15.17 midday in Thursday's session on the Toronto Stock Exchange.

That's below the bought-deal issue price of $16 apiece announced as part of the financing plan on Wednesday. Banks that bought the shares from Cenovus and are reselling them to investors would lose money on any shares they sell at a price below $15.48, reflecting the 3.25-per-cent commission they charged the company.

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Just before noon, the shares were trading down 12 per cent at $15.35 in Toronto.

A banker who was not on the deal said U.S. investors are wary, citing concerns that U.S. Republicans will slap a border tax on imports, hurting exports of Canadian oil.

The acquisition by Cenovus is the biggest oil sands deal to date, eclipsing Canadian Natural Resources Ltd.'s purchase of Royal Dutch Shell's oil sands holdings earlier this month. It would double Cenovus total production.

Cenovus said it would also sell assets pumping around 50,000 barrels per day to help fund the deal. It has also arranged $10.5-billion in loans.

The bought deal is co-led by JP Morgan and Royal Bank of Canada. It included an overallotment option that allowed the banks to purchase up to an additional 28.12 million shares for potential total proceeds of $3.45-billion.

The acquisition is expected to close in the second quarter.

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About the Authors

Jeff Lewis is a reporter specializing in energy coverage for The Globe and Mail’s Report on Business, based in Calgary. Previously, he was a reporter with the Financial Post, writing news and features about Canada’s oil industry. His work has taken him to Norway and the Canadian Arctic. More

Business Columnist

Andrew Willis is a business columnist for the Report on Business at The Globe and Mail, based in Toronto.He has been in business communications and journalism for three decades. More

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