Canadian oil and natural gas company Cenovus Energy Inc on Sunday announced it would acquire Husky Energy Inc in an all-stock deal worth CAD3.8 billion ($2.9 billion) as consolidation in the North American oil and gas industry accelerates amid a demand collapse caused by the coronavirus pandemic. Previously, Chevron bought Noble Energy for $4.2 billion, while ConocoPhillips took over Concho Resources for $9.7 billion.
Fuel demand collapsed due to the coronavirus pandemic that also put extra pressure on companies in Canada, the world’s fourth-largest crude producer, forcing them to slash expenses. Canada mostly extracts oil from oil sand, which incurs high production costs and emissions. As a result, foreign investors fled the country’s oil sector. At the same time, congested pipelines have put domestic players under stress. Consolidation will cut costs and make the industry leaner, analysts said.
After the deal, Cenovus shareholders would hold 61% of the new company, while Husky shareholders owned the rest. Husky’s biggest shareholder, Hutchison Whampoa, would control a 15.7% stake in the combined entity. According to both Cenovus and Husky, the deal is valued at CAD23.6 billion ($18.1 billion), including debt.
The merged entity will have 750,000 boepd production, making it Canada’s third-biggest oil and natural gas producer. The new entity will operate as Cenovus Energy Inc based in Alberta and is expected to generate synergies of CAD1.2 billion ($0.9 billion) annually. Cenovus and Husky shares have declined by 63% and 70% respectively in 2020, compared to a 53% loss in the Toronto energy index.
