Husky Energy swallowed in $23.6 billion Cenovus takeover

Cenovos Energy moves boldly back into Saskatchewan by buying the provinces historically largest oil producer

By
Western Investor
January 7, 2021





Husky’s Rush Lake thermal project near Lloydminster, Saskatchewan. | Brian Zinchuk
— Husky’s Rush Lake thermal project near Lloydminster, Saskatchewan. | Brian Zinchuk

Calgary-based Cenovus Energy completed its acquisition of Husky Energy on January 1, 2020,  in an all-stock transaction valued at $23.6 billion, inclusive of debt.

The landmark deal marked the end of one of the most significant and prominent players in the Saskatchewan oilpatch for three-quarters of a century. It also means a return to Saskatchewan of Cenovus, whose roots go back to the founding of the Canadian Pacific Railway.

Husky’s origins in the Lloydminster area trace to 1946, when it relocated a shut-down refinery from Riverton, Wyoming to the Alberta side of Lloydminster. Husky grew to become the dominant player in the northwest Saskatchewan oilpatch, and the largest producer in Saskatchewan for decades. In recent years, it was briefly supplanted by Crescent Point Energy for the number of barrels produced per day.

Cenovus had recently exited Saskatchewan, with its $940 million sale of its controlling interest in the Weyburn Unit to Whitecap Resources in 2017, part of its efforts to finance the $17.7 billion purchase of ConocoPhillip’s 50 per cent interest in jointly owned oilsands venture and deep basin conventional assets. Its acquisition of Husky marks Cenovus’ return to Saskatchewan in the biggest way possible, buying the province’s historically largest producer.

In 2009, Cenovus was spun out of EnCana, with Cenovus taking over the major oil plays, including the Weyburn Unit, and Encana focusing on natural gas. EnCana had previously been PanCanadian until 2002. PanCanadian’s roots, as a division of Canadian Pacific Railways, went back as far as the 1880s, with the discovery of natural gas near Medicine Hat. 

As recently as 2017, Husky had been taking a hard look at developing an additional 30,000 barrel-per-day asphalt refinery at Lloydminster, but those plans had since been shelved. The commissioning of one of its most recent thermal projects, Spruce Lake Central, had been delayed in 2020 due to the oil crash related to the COVID-19 pandemic, but it was later completed and brought online.

The merged company will operate under the Cenovus Energy name and will be headed by Alex Pourbaix, president and CEO. It will produce approximately 750,000 barrels of oil equivalent per day with refining capacity of approximately 660,000 barrels per day. The combined company is the third largest Canadian oil and natural gas producer and Canada’s second largest refiner and upgrader.

 


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