ConocoPhillips Took Off Like A Rocket After This Big News

Energy giant ConocoPhillips had an exciting trading day on Thursday after the company revealed that it would sell its oil sands and natural gas holdings in Canada to Cenovus Energy.

The stock soard and closed the day up almost 9%. Cenovus shares on the other hand dropped more than 13%.

ConocoPhillips CEO and chairman Ryan Lance said in a statement Wednesday, “This is a significant, win-win opportunity for ConocoPhillips and Cenovus.”

In a cash deal valued at $10.6 billion, ConocoPhillips will sell its position in the Foster Creek Christina Lake oil sands partnership and most of its western Canada Deep Basin gas assets.

The company will also receive $2.7 billion in shares of Canada-based Cenovus.

“This transaction will make an immediate and significant impact on the company’s value proposition by allowing us to rapidly reduce debt to $20 billion and double our share repurchase authorization to $6 billion. This means we will not only accelerate, but exceed, the three-year plan we laid out in November 2016,” said Lance.

ConocoPhillips is the world’s largest independent exploration and production company, based on proved reserves and production of liquids and natural gas.

According to Jim Cramer, the sale of a portion of its oil sands to Cenovus as a sign that the oil glut will keep prices low for a while.

“In one fell swoop ConocoPhillips confirmed a lot of what’s become the conventional wisdom in the oil patch: the price of crude’s not going to roar higher any time soon, even as it rallied nicely again today, climbing back over $50,” he said.

“It’s much better to take money from Cenovus, pay down debt, buy back stock and potentially increase the dividend than to keep pouring money into the dirtiest and most nasty form of oil around, the tar sands,” the Mad Money host explained.

“Personally, though, I’d much rather own an almost-Canadian-tar-sands-free Conoco than a debt-laden play on that now-out-of-style project,” Cramer said.

Disclaimer: We have no position in ConocoPhillips (NYSE: COP) and have not been compensated for this article.