Page 9 - NorthAmOil Week 43 2020

NorthAmOil COMMENTARY NorthAmOil

Consolidation continues with

Canadian mega-merger

Canada’s Cenovus Energy and Husky Energy have agreed to combine in the

latest major North American oil and gas deal

CANADA THE shale patch has been dominating headlines warrants, the premium is 23%.
on North American oil and gas consolidation The combined company will have production
WHAT: recently, but this week the spotlight was on Can- of around 750,000 barrels of oil equivalent per
Cenovus and Husky have ada after Cenovus Energy announced on Octo- day, with Husky contributing 275,000 boepd
agreed to a merger that ber 25 that it had agreed to merge with Husky to Cenovus’ 475,000 boepd. It will also have
will create a company Energy. upgrading and refining capacity of 660,000
worth CAD23.6bn The deal will see Cenovus acquire Husky for boepd, thanks to the addition of Husky’s
($17.7bn). CAD3.8bn (2.9bn), or CAD10.2bn ($7.7bn) 410,000 boepd to Cenovus’ 250,000 boepd.
including the assumption of debt, to cre- The companies anticipate achieving
WHY: ate a company with an enterprise value of CAD1.2bn ($902mn) worth of annual syner-
Oil companies are CAD23.6bn ($17.7bn). This will help Ceno- gies, mostly within the first year of combined
increasingly turning to vus – the third-largest Canadian producer by operations, and the remainder within the sec-
consolidation to boost output – to narrow the gap with top producers ond year. Around 50% of this will consist of
their performance in a Canadian Natural Resources Ltd (CNRL) and annual corporate and operating synergies and
difficult market. Suncor Energy. the other 50% of annual capital allocation syner-
The transaction is anticipated to close in the gies, which the companies said would be achiev-
WHAT NEXT: first quarter of 2021. able independently of commodity prices.
Husky has confirmed that “We will be a leaner, stronger and more
stalled work on its West Canadian giant integrated company, exceptionally well-suited
White Rose project will The deal is the largest Canadian oil and gas deal to weather the current environment and be
not resume in 2021. in nearly four years based on enterprise value. a strong Canadian energy leader in the years
Under the terms of the agreement, Husky share- ahead,” said Cenovus’s CEO, Alex Pourbaix.
holders will receive 0.7845 of a Cenovus share He added that the combination would result in
plus 0.0651 of a Cenovus share purchase warrant “significantly reduced” exposure to market vola-
in exchange for each Husky common share. This tility, while Husky’s CEO, Rob Peabody, said the
represents a 21% premium, excluding warrants, deal would allow the combined companies to
relative to Husky’s five-day volume-weighted “make better returns in a tougher environment”.
average price per share on October 23, the An SAF Group principal, Dan Tsubouchi, was
companies said in a statement. Including the quoted by Reuters as saying the combination

The merger will help
Cenovus to narrow the
gap with top producers
Canadian Natural
Resources Ltd (CNRL)
and Suncor Energy.

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