- Cenovus Energy (CVE) is set to create Canada’s third largest oil and natural gas producer by purchasing a 61 per cent stake in its rival Husky Energy
- Husky shareholders will receive 0.7845 of a Cenovus share plus 0.0651 of a share purchase warrant in exchange for each Husky share held
- The all-stock deal implies a transaction equity value for Husky of approximately C$3.8 billion
- With the transaction expected to close in the first quarter of next year, the combined entity will continue to operate as Cenovus Energy and is expected to generate 750,000 barrels of oil per day
- Cenovus Energy (CVE) is currently down 11.99 per cent to $4.30 per share, while Husky Energy (HSE) is up 8.36 per cent $3.44 per share at 10:20am EDT
Cenovus Energy (CVE) is set to create Canada’s third largest oil and gas producer by purchasing a majority stake in rival Husky Energy.
Under the terms of the agreement, Husky shareholders will receive 0.7845 of a Cenovus share plus 0.0651 of a share purchase warrant in exchange for each Husky share held.
The all-stock deal implies a transaction equity value for Husky of roughly C$3.8 billion, and will result in Husky shareholders owning a 39 per cent stake in the resulting entity, with Cenovus acquiring the 61 per cent majority stake. Once finalised, the business will continue to operate as Cenovus Energy.
In the current environment of significantly declined demand and weakened oil prices, the deal is expected to reduce Cenovus’ historic reliance on the Alberta sector while maintaining a healthy exposure to global commodity prices.
It follows a string of other US-based deals as major oil and gas companies look to consolidate their positions in a struggling market. These include ConocoPhillips $9.7 billion takeover of Concho Resources and Chevron’s $4.2 billion purchase of Noble Energy.
Alex Pourbaix, President and CEO of Cenovus Energy, said the resulting company would be leaner, stronger and “exceptionally well-suited to weather the current environment.”
“The diverse portfolio will enable us to deliver stable cashflow through price cycles, while focusing capital on the highest-return assets and opportunities. The combined company will also have an efficient cost structure and ample liquidity,” he added.
Based on year-to-date production, Cenovus’ produces 475,000 barrels of oil per day, while Husky produces 275,000. The resulting company is estimated to produce a total of 750,000 barrels per day, with an upgrading and refining capacity of 660,000 barrels per day – the second largest in Canada.
Rob Peabody, President and CEO of Husky Energy, also commented on the deal, noting the complementary assets of the two companies.
“The integration of Cenovus’s best-in-class in situ oil sands assets with Husky’s extensive North American upgrading, refining and transportation network and high netback offshore natural gas production, will create a low-cost competitor and support long-term value creation,” he said.
With the transaction expected to close in the first quarter of next year, Alex will remain as CEO of Cenovus while Jeff Hart, the current financial chief of Husky, will act as Chief Financial Officer.
The Board of Directors will also be amended to consist of eight members in total – four from Cenovus and four from Husky.
Cenovus Energy (CVE) is currently down 11.99 per cent to $4.30 per share, while Husky Energy (HSE) is up 8.36 per cent $3.44 per share at 10:20am EDT.
