Cenovus CEO Alex Pourbaix will lead the merged company, while Husky CFO Jeff Hart will assume this role in the new entity.
“We will be a leaner, stronger and more integrated company, exceptionally well suited to withstand today’s environment and be a strong Canadian energy leader for years to come,” Pourbaix said in the release. .
“The diversified portfolio will allow us to generate stable cash flow throughout price cycles, while focusing capital on the most profitable assets and opportunities. The merged company will also have an efficient cost structure and sufficient liquidity.
The deal is the latest sign of consolidation in an energy sector that has been battered by the twin crisis of the COVID-19 economic slowdown and low crude oil prices.
Last Monday, ConocoPhillips announced it would buy shale producer Concho Resources in a deal valued at US $ 9.7 billion that would create one of America’s largest oil producers.
Earlier this month, an analyst reported the acquisition of a 17.6% stake in Calgary oil and gas producer NuVista Energy Ltd. by rival Paramount Resources Ltd. as part of a trend towards “forced” consolidation in Canada’s struggling energy sector.
End oil reduction quotas
News of the Cenovus-Husky deal follows the Alberta government’s announcement on Friday that the province would end its oil reduction quotas, a temporary measure intended to support oil prices.
Spokesmen for both companies said on Friday they welcomed the move. Indeed, Cenovus was already producing above its reduction levels with credits purchased from other companies.
The business combination will create annual savings of $ 1.2 billion, largely achieved in the first year and regardless of commodity prices, the companies said.
“Bringing together our talents and complementary assets will allow us to unlock the full potential of this new resilient company,” Husky CEO Rob Peabody said in the statement.
“The integration of Cenovus’ best in-situ oil sands assets with Husky’s extensive North American upgrader, refining and transportation network… will create a low-cost competitor and support long-term value creation. ”
The merged company will be Canada’s third-largest producer of oil and natural gas, based on the company’s total production, Cenovus said. It will have low exposure to the benchmark oil sands crude, which is generally trading at a discount to the North American benchmark West Texas intermediary.
The transaction has been approved by both boards of directors and is expected to close in the first quarter of 2021, subject to shareholder and regulatory approvals.
Husky shareholders will receive 0.7845 Cenovus shares plus 0.0651 Cenovus share purchase warrant in exchange for each Husky common share.