"We're bringing together Cenovus's top-tier (steam-driven oilsands) assets at Foster Creek and Christina Lake with Husky's extensive refining and upgrading network. This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. OPEC has since agreed to reduce production by 9.5 million barrels per day. Today, Cenovus Energy reported a $1.8-billion first-quarter loss. The transaction has been approved by both boards and is expected to close in the first quarter of 2021, pending shareholder and regulatory approvals. Companies in this story: (TSX:CVE, TSX:HSE), Sign in or register for your free account, Feeding Houston's hungry: 1M pounds of food daily for needy, Chinese fintech could shatter records with $35B share offer, Dunkin' shares hit all-time high after holding buyout talks. Husky’s market value stood at C$3.2 billion as of Friday’s close, which implies Cenovus is offering a 19.5% premium through the all-stock deal. He added about $200 million in savings will come from sharing technical expertise and the other $600 million through better use of capital by focusing on assets with higher return potential. That followed Chevron Corp’s $4.2 billion purchase of Noble Energy. The combined company's board of directors is to be made up of eight Cenovus appointees and four from Husky. At the start of this year, the world was consuming about 100 million barrels per day of oil. Get the latests news, prebuys and contest updates. "And it is a testament to the confidence our lenders have in our company.". As of this writing, Cenovus Energy shares are trading at $4.62 on the Toronto Stock Exchange, up 5.37 percent since this morning's opening. I didn't have a mask so I had to buy one from 7-Eleven so I could get on the bus. "When you combine two companies with similar geographies and somewhat similar operations, you're always going to have some overlap ... in this case, there would probably be relatively a little more weight on the head office functions, just because we aren't quite as overlapping in the field," he said. In September, it said it was reviewing the project while asking for direct investment from the federal government and the province of Newfoundland and Labrador. The merged company is expected to break-even on a free funds flow basis at West Texas Intermediate pricing of US$36 per barrel in 2021, and at less than WTI US$33 per barrel by 2023. The third-largest producer in the Canadian oilsands has taken a major hit from the global crash in energy prices. The combined company is expected to generate annual synergies of C$1.2 billion and will operate as Cenovus Energy Inc with headquarters in Alberta, Canada, the statement said. They've also agreed to a standstill agreement under which they are subject to certain voting requirements and transfer restrictions for a maximum of five years. Canada has an estimated 168.5 billion barrels of established reserves of crude oil, with 96 percent in the oilsands. Cenovus CEO Pourbaix will serve as chief executive of the merged company with Jeff Hart, currently Husky’s finance chief, becoming chief financial officer. Cenovus owns a crude-by-rail terminal northeast of Edmonton. Cenovus and Husky shares have lost 63% and 70% respectively this year, exceeding the Toronto energy index loss of 53%. Cenovus said the combined company will be able to produce 750,000 barrels of oil equivalent per day (BOE/d). Hutchison Whampoa is the biggest shareholder of Husky currently, with a 40.2% stake. Cenovus reported producing 387,036 barrels per day in the oilsands in the first quarter, up from 342,980 barrels in the first quarter of 2019. Please check your browser settings to ensure that it is not blocking Facebook from running on straight.com. Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Cenovus’ deal for Husky is valued at C$23.6 billion, including debt, the companies said in a joint statement. That included slashing its "capital spending guidance" by $600 million and shaving about $100 million off its operating costs from the original 2020 budget. "Our ability to secure a significant new credit facility in this challenging market gives us even more financial flexibility to withstand a prolonged period of low oil prices," Pourbaix said. 365 Bloor Street East, Toronto, Ontario, M4W 3L4. We apologize, but this video has failed to load. The combined companies are expected to be able to sustain output at about 750,000 barrels of oil equivalent per day for about $2.4 billion a year, 25 per cent less than required separately, Pourbaix said. "It is unique for the assets of two companies to complement each other this well," he said on a conference call on Sunday. 3 oil and gas producer as a pandemic-driven demand collapse and weak oil prices force the industry to consolidate. Canadian companies have been under stress for six years, dating back to the last downturn, due to congested pipelines and the flight by foreign oil companies and investors due to Canada’s high production costs and emissions. The country is the fourth-largest producer and fourth-largest exporter of oil, with 96 percent of exports going to the United States. Cenovus to buy Husky for $2.9 bln to create No.3 Canadian energy firm; more deals seen, tap here to see other videos from our team. Comments may take up to an hour for moderation before appearing on the site. Hong Kong tycoon Li Ka-shing-controlled Hutchison Whampoa would hold a 15.7% stake in the new company. 3 oil and gas producer as a pandemic-driven demand collapse and weak oil prices force the industry to consolidate. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Thank you for your patience as we work towards bringing this back. ", Husky CEO Rob Peabody added it's the "start of a new chapter.". The most recent larger deals happened in the first quarter of 2017, when Cenovus bought ConocoPhillips assets and Canadian Natural purchased assets from Shell and Marathon Oil. "Over the past several months as we worked together on this transaction, from a value and strategic perspective, the merits and overall fit have become abundantly clear," he said on the call. It had a $4.5-billion committed credit facility before adding an additional $1.1 billion to that in April from some of its existing Canadian lenders. “The diverse portfolio will enable us to deliver stable cash flow through price cycles,” Alex Pourbaix, Cenovus President and Chief Executive Officer said. Peabody said on the call that Husky has decided to cancel spending in 2021 on its partly completed $2.2-billion West White Rose offshore oil project. Today, Cenovus Energy reported a $1.8-billion first-quarter loss. We encountered an issue signing you up. The transaction has been unanimously approved by the boards of directors of Cenovus and Husky and is expected to close in the first quarter of 2021, the companies said. Read more about cookies here. In a news release, the Calgary-based company stated that it's taken "swift and decisive steps to enhance its financial resilience and protect its balance sheet in the face of the global macro-economic challenges caused by the COVID-19 pandemic". After the deal closes, Cenovus shareholders would own 61% of the combined entity, with Husky shareholders controlling the rest. RBC Capital Markets and TD Securities are acting as financial advisors to Cenovus, while Goldman Sachs Canada and CIBC Capital Markets are acting as financial advisors to Husky. The Calgary companies say in a joint announcement that the combined company will be the third largest Canadian oil and natural gas producer, based on … The deal is the biggest oil and gas industry M&A in nearly four years, based on enterprise value, said Tom Pavic, president of Sayer Energy Advisors, which advises on M&A. VANCOUVER/WINNIPEG (Reuters) - Cenovus Energy Inc (), a major Canadian oil producer, has signed a deal to move more crude with the Canadian National … That's quite a reversal from the $110-million profit reported over the same period in 2019. © 2020 Financial Post, a division of Postmedia Network Inc. All rights reserved. There was an error, please provide a valid email address. "The strength of our balance sheet, the quality of our long-life oil sands reserves and the flexibility of our business to respond quickly to the changing external environment have positioned us well to withstand an extended period of low oil prices," Cenovus president and CEO Alex Pourbaix said in a news release. "When economic conditions improve, we'll be ready to contribute to Canada's economic recovery in a meaningful way.". Unauthorized distribution, transmission or republication strictly prohibited. This advertisement has not loaded yet, but your article continues below. Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc. The next issue of Top Stories Newsletter will soon be in your inbox. CALGARY — Cenovus Energy is buying Husky Energy in an all-stock deal valued at $23.6 billion. "Cenovus is actively managing its production levels as market conditions change to optimize the value it receives for its products," the company stated. The deal, announced on Sunday, follows recent big deals in the United States. Article content. Cenovus owns 50 per cent of two U.S. refineries in Illinois and Texas in partnership with Phillips 66, and Husky owns a refinery in Lima, Ohio, and is a 50-50 partner with BP in a refinery in Toledo, Ohio. By continuing to use our site, you agree to our Terms of Service and Privacy Policy. However, some estimates are that global demand has shrunk by 30 million barrels per day during the pandemic. Both entities have agreed to support the transaction, which will leave them with about 27.2 per cent of the merged company. The all-stock transaction was cast as a $23.6-billion deal by the Calgary-based companies by including the value of Cenovus and net debt, reported at the end of the second quarter as $8.2 billion for Cenovus and $5.1 billion for Husky. CALGARY — A surprise move by Cenovus Energy Inc. to buy rival Husky Energy Inc. for $3.8 billion in shares will create the third-largest Canadian oil and natural gas producer by total production, the companies announced Sunday. Visit our Community Guidelines for more information and details on how to adjust your email settings. Search is currently unavailable. Refineries have suffered during the pandemic as travel restrictions hammered demand for jet fuel and gasoline, but in more normal times they can provide a hedge for oil producers when crude prices are low. Husky is controlled by Hong Kong billionaire Li Ka-Shing through Hutchison Whampoa Europe Investments SARL, with 40.1 per cent, and L.F. Investments SARL, which holds 29.32 per cent of the company's common shares. In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post. According to the federal government, Canada produced 4.6 million barrels per day in 2018 (including condensates and pentanes plus). Husky shareholders will receive 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share. The merger combines Cenovus production of about 475,000 boe/d with Husky's 275,000 boe/d and their combined refining and upgrading capacity is expected to total about 660,000 barrels per day (Cenovus 250,000 bpd, Husky 410,000 bpd). Combining the companies will create annual savings of $1.2 billion, largely achieved within the first year and independent of commodity prices, the companies said. Consolidation makes the Canadian industry leaner and lowers costs, said Jackie Forrest, executive director at the ARC Energy Research Institute, adding that deal-making is likely just getting started.
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