Cenovus buys Husky Energy

[MountainTi]

Not surprised, but wow

https://ca.reuters.com/article/idCAKBN27A0DS

[NCC]

Tough times ahead for more people, including anyone who holds real estate in downtown Calgary.

[DiabeticKripple]

Jeez that’s an oil heavyweight getting bought out!

Not good!

[ward]

Originally Posted by DiabeticKripple

Jeez that’s an oil heavyweight getting bought out!

Not good!

Cenovous thinks otherwise.

[Big Grey Wolf]

Never was to impressed with Husky Management out of China. I believe this will be much better for the overall Husky operation. May loose a few Management positions in Calgary, but same field staff will be employed.

[Dean2]

Husky has probably been the worst run oil company over the past 30 years, even worse than Petro Canada. I counselled many to never buy shares in this dog. Analysts called it "Undervalued" for decades and it was on the perennial buy list. All that proved is those analysts knew nothing about the oil and gas business. Husky has destroyed literally Billions in shareholder value. It was run by a demented old guy who never cared how poorly run it was. It was bought buy Cenovus for shares at a price that values Husky shares at $3.30. They will be no loss at all.

[roper1]

Originally Posted by Dean2

Husky has probably been the worst run oil company over the past 30 years, even worse than Petro Canada. I counselled many to never buy shares in this dog. Analysts called it "Undervalued" for decades and it was on the perennial buy list. All that proved is those analysts knew nothing about the oil and gas business. Husky has destroyed literally Billions in shareholder value. It was run by a demented old guy who never cared how poorly run it was. It was bought buy Cenovus for shares at a price that values Husky shares at $3.30. They will be no loss at all.

Dean, do you think that will run up the Canadian $ tomorrow ?

[JB_AOL]

Originally Posted by Big Grey Wolf

Never was to impressed with Husky Management out of China. I believe this will be much better for the overall Husky operation. May loose a few Management positions in Calgary, but same field staff will be employed.

Hate to say it... But they announced synergies of $1.2b. thats an awful lot of layoffs.. there was rumors at Cenovus prior to this announcement that upwards of 6000 were being cut.

[Dean2]

This deal isn't large enough to move the Canadian dollar on its own. Oil going up or down would have a far larger effect and there is downward pressure on Oil prices because demand is still way depressed. With Alberta taking off the production limits in Dec that could further push down Canada oil prices. The one positive for Canada is supplies from South America are drying up so WCS has actually been rising and the spread to WTI is much lower than is has been for years. Many of the refineries in the States are designed to use the cheaper Heavy Oil and can't run lighter oils, even though there is a growing supply.

[bdub]

Cenovus gets Huskies refining assets and their Asian nat gas operations. That's the big plus in this deal for Cenovus.

I don't think either company has been that well run. I wonder what chunks they are going to spin off.

[DiabeticKripple]

So I guess all the husky gas stations will now be Cenovus gas stations?

[58thecat]

what does this do for cenovus shares?

[Dean2]

Originally Posted by 58thecat

what does this do for cenovus shares?

I would expect Cenovus to drop, they will be facing huge restructuring cost over the next 12-18 months. Husky was a very poorly run and inefficient company. It will take a while to realise the forecasts billions in synergies. Also, Husky was not profitable, they lost 2.6 billion in the last 6 months alone, so that will be a drain on Cenovus earnings as well. In my opinion Cenovus has overpaid a lot for Husky. The recent share price on Husky has been around 2.50, so the Cenovus offer is at a 20% premium that I don't think is warranted.

[bdub]

Originally Posted by 58thecat

what does this do for cenovus shares?

I think the market will initially like it. A billion or two in synergies. A larger more diverse company. Long term it depend on how well they integrate the two companies, commodity prices ... We will see tomorrow morning what the market thinks I guess.

[zabbo]

Originally Posted by DiabeticKripple

So I guess all the husky gas stations will now be Cenovus gas stations?

Apparently, Husky made some kind of deal with Esso to rebrand husky card locks and some of their gas stations as Esso. Not sure what that means to this deal?? Any thoughts Dean?
There was a Husky station in our neighborhood for years. They just finished tearing it down early this summer.

[Dean2]

Originally Posted by zabbo

Apparently, Husky made some kind of deal with Esso to rebrand husky card locks and some of their gas stations as Esso. Not sure what that means to this deal?? Any thoughts Dean?
There was a Husky station in our neighborhood for years. They just finished tearing it down early this summer.

Husky;s entire retail division is not a significant component of their overall income, less than 5%, thought it is at least break even profitable. I doubt that anything that happens with their gas stations and card locks will make any material difference. Husky need to get back to overall profitability, when you are losing almost 6 billion a year, which for perspective was almost 3 times the entire market value of Husky, the 500 million of gross sales a year through their gas stations isn't even a pimple on the Elephant's butt.

[MountainTi]

Originally Posted by DiabeticKripple

So I guess all the husky gas stations will now be Cenovus gas stations?

I'm guessing it will work much the same as Petro Canada service stations

[Jim Blake]

In 1986 Husky embarked on a partnership with the Schwartz Brothers to revamp the Post Hotel in Lake Louise. Kind of a different diversification LOL.

I'm not sure if Husky still has an interest in the Hotel, but it certainly is one of our favorite annual places.

[bdub]

Originally Posted by 58thecat

what does this do for cenovus shares?

A link to the webcast and slide deck. Worth a listen and look if you interested in the deal.

https://www.cenovus.com/invest/trans...ansaction.html
https://www.cenovus.com/invest/docs/...ate-update.pdf

[jstubbs]

How long till Exxon sells Imperial?

[roper1]

Originally Posted by MountainTi

I'm guessing it will work much the same as Petro Canada service stations

Flying J a suitable purchaser?

[JustBen]

Originally Posted by jstubbs

How long till Exxon sells Imperial?

I'm okay with selling out so long as CNRL stays clear.

[big zeke]

Always hate to see consolidation, especially on this scale but it seems the only way economies of scale are achieved. The cost savings will come from staff cuts (at least partially) and that is never a good thing, contractors will contribute the rest. CVE has streamlined in recent years though they still have a long way to go, HSE was always very cheap though tagged with some moderate (or poor) assets. Considering HSE stock is about 30% of what it was a few years ago it might been a cheap buy though CVE is more like 25%. When they get the size that this merged company will achieve (750kBPD) they will definitely be spinning off some underperforming assets though the market is awash in crap assets at the moment.

CVE has a few examples of poor shopping, the CPC assets were examples, they bought a railway terminal once IIRC, they got a bunch or railcars which only make sense if diffs blow out again. If WTI hits 60+ in a year or so they will look smart, if it stays in the 40 range they won't

The island keeps shrinking in Western Canada, never a good thing.
Zeke

[coyotecaller]

Originally Posted by jstubbs

How long till Exxon sells Imperial?

Sooner than you think...

[bdub]

Originally Posted by big zeke

Always hate to see consolidation, especially on this scale but it seems the only way economies of scale are achieved. The cost savings will come from staff cuts (at least partially) and that is never a good thing, contractors will contribute the rest. CVE has streamlined in recent years though they still have a long way to go, HSE was always very cheap though tagged with some moderate (or poor) assets. Considering HSE stock is about 30% of what it was a few years ago it might been a cheap buy though CVE is more like 25%. When they get the size that this merged company will achieve (750kBPD) they will definitely be spinning off some underperforming assets though the market is awash in crap assets at the moment.

CVE has a few examples of poor shopping, the CPC assets were examples, they bought a railway terminal once IIRC, they got a bunch or railcars which only make sense if diffs blow out again. If WTI hits 60+ in a year or so they will look smart, if it stays in the 40 range they won't

The island keeps shrinking in Western Canada, never a good thing.
Zeke

They were mentioning that the merger will pretty much eliminate the combined companies exposure to WCS/WTI differentials going forward. Husky has the excess refining/upgrading capacity that Cenovus can use.

The patch is getting leaner and leaner. When we see prices and takeaway improve I think there is a fair bit of upside going forward on some of these Canadian oil companies that will be left over.

[Tannerdog]

I'm sure this deal will be the same as most of the others I have seen in 30 yrs+ in the industry. Cenovus probably looked at all the shiny assets that are no doubt worth a pile of money. What companies always forget about are the liabilities (old wells, reclamation, contamination etc) They throw a number out but it's always about 10x too little. Husky assets are in horrible shape......there will be buyer remorse I think.

[RandyBoBandy]

Where's HAL ??

[Dean2]

Originally Posted by bdub

I think the market will initially like it. A billion or two in synergies. A larger more diverse company. Long term it depend on how well they integrate the two companies, commodity prices ... We will see tomorrow morning what the market thinks I guess.

Would appear the market feels the same way as I do about the merger. Husky up to exchange value of shares, Cenovus is off 12% so far this morning. To be fair WTI is off .$1.48 and WCS is down 90 cents, the overall TSX is off 212 points or 1.3%. All that considered, if the Cenovuus deal was considered really strong, it should be bucking the trend or at least holding even. I am inclined to believe the Cenovus shares will continue to suffer in the foreseeable future, Canadian Oil and Gas has become really unpopular due to Federal policies and the massive anti oil media campaign.

[ward]

Originally Posted by Dean2

Would appear the market feels the same way as I do about the merger. Husky up to exchange value of shares, Cenovus is off 12% so far this morning. To be fair WTI is off .$1.48 and WCS is down 90 cents, the overall TSX is off 212 points or 1.3%. All that considered, if the Cenovuus deal was considered really strong, it should be bucking the trend or at least holding even. I am inclined to believe the Cenovus shares will continue to suffer in the foreseeable future, Canadian Oil and Gas has become really unpopular due to Federal policies and the massive anti oil media campaign.

Question: Considering what is going on to the south next week and the huge difference in policy and philosophy between the two sides, will it not be hard to make sense out of anything for a while ?

[Dean2]

Originally Posted by ward

Question: Considering what is going on to the south next week and the huge difference in policy and philosophy between the two sides, will it not be hard to make sense out of anything for a while ?

Oil and Gas are out of favour worldwide, worse in Canada to a degree, but long term, this is not where you want to park money. Biden getting in won't help this sector at all but this trend is not going to change, there is just too much momentum on far too many fronts. We can talk about conspiracies, climate change being a hoax or 8000 other things but the trend is set. We also know oil and gas is not going anywhere for the next 20 years at least, it is impossible to eliminate it. Doesn't change the fact that this is not an industry that attracts large amounts of outside capital any more. If you own oil and gas stocks, sell them on strength. Even pipelines will slowly trend down over the next 20 years, they will still produce good dividends, but there will be little capital appreciation.