Cenovus Energy is to buy rival Canadian oil producer Husky Energy, which is controlled by Hong Kong billionaire Li Ka-shing, in a wave of consolidation in the form of a C $ 10.2 billion ($ 7.8 billion) deal with the Northern Speeds up America’s battered oil and gas sector.
The new company will be worth C $ 23.6bn, Cenovus said, adding that it is Canada’s third-largest oil and gas producer, with production of 750,000 barrels per day concentrated in the bitumen-rich oil sands of northern Alberta, a US crude. Is the largest single source of. Import.
The transaction is the latest in a string of North American oil mergers as operators seek to consolidate and cut costs. The biggest came last week when ConocoPhillips agreed to buy Conco Resources in a $ 9.7 billion deal, placing another major bet on the future of US Shell.
Other recent deals include a $ 7.6 billion acquisition of US shell group Parsley Energy by Pioneer Natural Resources, Chevron’s $ 13 billion plan to tie up with rival WPX Energy to buy Noble Energy and Devon Energy’s 12bn deal is.
The fall in oil prices caused Cenovus shares to fall by more than 60 percent and Husky’s by nearly 70 percent since early January.
The deal was conceived as a nil-premium merger, but due to declining share prices, Cenovus agreed to pay the Husky shareholders a 21 percent premium, or 23 percent, including warrants. The transaction is valued at approximately $ 3.8 billion in Husky shares, or $ 10.2 billion including debt.
“We will be a thinner, stronger and more integrated company, to improve the current environment and be a stronger Canadian energy leader in the coming years,” said Alex Pourbach, Chief Executive Officer of Cenovus.
The new company will be 61 percent owned by Cenovus shareholders, with reminders kept by Husky’s investors. Two units controlled by Mr. Lee, which currently owns about 70 percent of the Huskies, will emerge with more than 27 percent of the new company’s common stock.
The acquisition meant that Cenovus would now have sufficient solvency to handle the bulk of its own production, said Mark McStoiter, lead researcher for North America at Wood Mackenzie, which could add some “natural hedging back to the portfolio “.
Following the withdrawal of many international oil companies from the Alberta oil sands – where high costs of production of bitumen, persistent environmental protests, and slow progress in building new pipeline infrastructure have bothered investors – further consolidation in the hands of the Cenovus deal zone Points to Of local companies.
Future bargaining could see the remaining oil sands interests held by Total, Shell, BP, and Chevron – areas no longer targeted for acquisition by Canadian operators – be considered strategic, Mr. Oberoseter said. “Calgary used to be an international center, but we’ve lost that,” he said.
Both Cenovus and Husky were among the oil-sands operators, forcing some to shut down production this year due to falling prices. The Alberta government, which earlier this year offered to cooperate in its supply cuts to the OPEC cartel, has used a program of so-called curatories to restrict supplies from operators including Cenovus and Husky, so that production is heavy Infrastructure can be stopped.
Canada’s production of bitumen – ultra-heavy oil that must be upgraded before fuel refining – has attracted environmental opposition due to its carbon intensity and huge ecological footprint in northern Alberta.
Inadequate pipeline capacity to ship increased versions of oil-sand production to markets beyond North America has led to deep discounts on Canadian exports from time to time. The low quality of Alberta oil also makes it cheaper. US oil has traded at around $ 40 a barrel in recent weeks, while the benchmark price for Canadian oil has been kept at around $ 30 a barrel.
The companies said the annual synergy created by the deal would be $ 1.2 billion, broadly achieved within the first year. Free cash flow will be obtained in 2021 for a barrel of West Texas Intermediate priced at $ 36.
A new 12-man board will include eight directors from Cenovus and the rest from Husky.