Cenovus Energy (TSX:CVE) shares fell more than 10 per cent on Tuesday after the oil company announced plans for more asset sales, deeper cost-cutting and the unexpected retirement of CEO Brian Ferguson. File photo by THE CANADIAN PRESS

Cenovus Energy CEO to retire, shares tumble

CALGARY — Cenovus Energy (TSX:CVE) shares fell more than 10 per cent on Tuesday after the oil company announced plans for more asset sales, deeper cost-cutting and the unexpected retirement of CEO Brian Ferguson.

Its stock fell as low as $9.11 or 11.4 per cent from Monday’s close and down about 48 per cent since it announced in late March a $17.7-billion blockbuster deal buy assets from ConocoPhillips.

“It has been a trying time for our shareholders,” Ferguson said during a presentation to investors in Toronto.

As he has since the deal was announced, Ferguson defended it, saying Cenovus paid “a fair price for top-tier assets.” He said he is confident the company will be able to sell assets to pay down debt before the end of the year and will then further cut costs to generate free cash flow to be returned to shareholders.

Energy analyst Rob Cooper of Acumen Capital said investors are doubtful that Cenovus has the expertise to develop the Alberta and B.C. Deep Basin assets it has bought from ConocoPhillips, nor does he believe the company will get the price it wants in asset sales given current low oil prices.

The fact that Cenovus announced Ferguson’s departure without naming a successor suggests a “repudiation” of his strategy, Cooper added.

Ferguson, 60, has led Calgary-based Cenovus since its launch as a public company in December 2009. He will retire as CEO and from the board of directors on Oct. 31. He plans to stay as an adviser until the end of March.

The company’s focus since splitting from Encana (TSX:ECA), where Ferguson was the chief financial officer, has been mainly on oilsands production in Western Canada. It also has non-operating interests in two U.S. refineries.

It said it is working towards selling between $4 billion and $5 billion of assets by year-end, up from its previous plans to raise at least $3.6 billion to pay off a loan in that amount.

It now aims to sell its non-oilsands assets including Pelican Lake, Suffield, Weyburn and Palliser, which together produce about 112,000 barrels of oil equivalent per day.

Cenovus said it also intends to cut up to an additional $1 billion in costs over the next three years. About half of the savings are expected from efficiencies from its increased size and redesigned drilling techniques.

The company also unveiled a five-year plan to grow free funds flow by 14 per cent per year and production at a six per cent compound annual growth rate if benchmark U.S. oil prices average US$55 per barrel. On Tuesday, that price hovered around the US$43 mark, the lowest it’s been since November.

Ferguson said the company will ”throttle back” conventional oil and gas capital spending if the price stays in the US$40-$45 range for a prolonged period.

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