Cenovus will sell 67.5 million shares at C$22.25 each as part of a so-called bought deal led by RBC Capital Markets and TD Securities, the Calgary, Alberta-based company said in a statement late yesterday.
Proceeds from the sale will partially be used to fund the company’s C$1.8 billion to C$2 billion capital expenditure program for 2015.
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.
Cenovus is one of the first large Canadian energy companies to complete a major financing since oil prices started skidding at the end of June. The move demonstrates how even well-respected companies that have already taken steps to cut costs and protect their balance sheets are feeling the pressure of North American crude prices that have been cut in half since last summer.
The company’s U.S.-listed shares fell 6.6 percent to C$17.59 at 9:30 a.m. in New York, extending losses over the past six months to 42 percent.
Cenovus last week cut 800 jobs, reducing staff by 15 percent. It also altered its dividend reinvestment plan, allowing investors to take their payments in the form of shares issued at 3-per-cent discount rather than cash. The discount gives shareholders an incentive to accept the shares, allowing Cenovus to hold on to more of its money. Cenvous pays investors a total of about C$800 million a year in dividends.
Last month the company delayed projects and lowered its 2015 capital budget to between C$1.8 billion and C$2 billion, from an earlier target of as much as C$2.7 billion.
The deal would be the third-largest transaction of its kind for Canadian energy companies in the past 15 years, according to Bloomberg.
The North American benchmark price for oil last traded at $52.36 a barrel, down $1.17. It is still less than half the $107 it traded for last June.
In a bought deal, companies sell shares, often at a discount to the market price, to investment banks who then sell them to investors. That way banks take on the risk associated with the uncertainty of a final sale price instead of the company.