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Cenovus and Husky Energy have struck a deal to combine their businesses in an all-stock transaction worth US$17.92 billion (C$23.6 billion). The size of the deal includes debt, Cenovus said in a news release.
The company noted that the two expected to save $1.2 billion from the tie-up, most of it during the first year after the transaction.
The net value of the deal is US$2.89 billion (C$3.8 billion), according to media reports, which means the bulk of the gross total is the two companies’ debt in addition to the value of the buyer, Cenovus.
Cenovus and Husky Energy both suffered their fair share of pain as the pandemic added to already considerable woes among Canadian oil producers. The industry had not yet recovered from the fallout of the last oil price crash and was struggling with a pipeline shortage that pressured their selling prices when the pandemic came on the scene and pushed a mot of them into negative earnings territory.
Cenovus and Husky were no exception. Both swung to losses this year, cut spending, and started reviewing projects and planning job cuts. Cenovus was forced to suspend dividend payments for a while, and Husky cut its dividend by 90 percent.
The combined company will produce some 750,000 bpd of oil equivalent daily and operate refining capacity of 660,000 bpd. This will make it the third-largest oil and gas company in Canada.
“We will be a leaner, stronger and more integrated company, exceptionally well-suited to weather the current environment and be a strong Canadian energy leader in the years ahead,” said Cenovus president and chief executive, Alex Pourbaix, who will be at the helm of the new company.
“The diverse portfolio will enable us to deliver stable cash flow 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.”
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.