"Cenovus announces repurchase of 84% of its outstanding warrants" ($CVE)

Announcement today:

Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) has reached separate agreements with each of Hutchison Whampoa Europe Investments S.à r.l. (HWEI) and L.F. Investments S.à r.l. (LFI) to purchase for cancellation all of the warrants held by HWEI and LFI, respectively, representing an aggregate of 45,484,672 warrants (CVE.WT), for $711 million in the aggregate (the Warrant Repurchase Transactions). As part of Cenovus’s combination with Husky Energy Inc., each Husky shareholder received 0.7845 of a Cenovus common share plus 0.0651 of a Cenovus common share purchase warrant in exchange for each Husky common share, with each whole warrant having an exercise price of $6.54 per common share, expiring January 1, 2026.

The price to be paid for each warrant pursuant to each Warrant Repurchase Transaction represents a price of $22.18 per common share, less the warrant exercise price of $6.54 per common share. The warrants will be cancelled at close, which is expected to occur later today. The company has negotiated payment terms that provide flexibility to work within its shareholder returns framework, with no expected impact to Cenovus’s ability to achieve its $4.0 billion net debt target. At its discretion, Cenovus has the option to pay the aggregate warrant purchase price of $711 million for the combined Warrant Repurchase Transactions through the remainder of 2023, within each quarter’s excess free funds flow, with full payment being made no later than January 5, 2024.

The 45,484,672 warrants cancelled as part of the Warrant Repurchase Transactions would, if exercised, represent approximately 2.4% of Cenovus’s total common shares outstanding. This transaction represents a repurchase of 84.1% of the warrants that remain outstanding. HWEI and LFI will continue to own 316,927,051 common shares (16.7%) and 231,194,699 common shares (12.2%), respectively, of Cenovus’s issued and outstanding common shares.

“This is a unique opportunity for Cenovus to continue to enhance shareholder returns by acquiring these warrants at a discount to the market price,” said Jon McKenzie, Cenovus President & Chief Executive Officer. “The agreements reached separately with HWEI and LFI benefit all Cenovus shareholders. Both HWEI and LFI are committed, long-term Cenovus shareholders and we continue to value each entity’s support and confidence in our company.”