Workforce losses expected as Cenovus, Husky merge

Cenovus Energy will buy Husky Energy in a $3.8-billion merger announced on Sunday. The resulting synergies are expected to save both companies $1.2 billion — and cost Albertans jobs. 
 
The new company will maintain the name Cenovus and remain headquartered in Calgary. 
 
Energy Minister Sonya Savage said consolidation is not unexpected given the economy.
 
“We have no doubt Alberta’s oil and gas sector will be in a strong position in meeting post-pandemic global energy demand,” she said in a statement to AB Today. 
 
Job cuts are expected. Alex Pourbaix, Cenovus president and chief executive officer, told investors on a Sunday call that the two companies’ overlap is mostly on the corporate side. 
 
That means job losses will be felt most acutely in downtown Calgary where $1.2 billion in “run-rate synergies” will reduce the number of management and corporate positions required to run operations (workers in the field are less likely to be affected, Pourbaix said). 
 
Once the merger is complete, the new firm will be the third-largest oil company and second-largest refiner in Canada, boasting 750,000 barrels per day in production, 660,000 in refining and upgrading capacity and 265,000 in pipeline takeaway capacity. 
 
“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,” Pourbaix said in a news release.
 
The merger will reduce the companies’ vulnerability to the West Texas Intermediate-Western Canadian Select differential by combining their upstream and downstream assets. (When the price differential is wide, Husky’s refineries and upgraders benefit; when it shrinks and oil prices rise, Cenovus’ production assets do.) 
 
“The integration of Cenovus’ best-in-class in situ oilsands assets with Husky’s extensive North American upgrading, refining and transportation network and high netback offshore natural gas production, will create a low-cost competitor and support long-term value creation,” said Husky president and CEO Rob Peabody in a news release.
 
The break-even price of oil for the combined company is expected to drop to $33 per barrel by 2023, lower than it would be for either firm on a standalone basis.
 
In the short-term, the company’s priority will be shoring up its balance sheet, rather than capital expenditures.
 
The deal is expected to close in early 2021, pending shareholder and regulatory approval (both boards have given it the A-OK).