Cenovus Energy is to buy rival Canadian oil producer Husky Energy, controlled by Hong Kong billionaire Li Ka-shing, in a C$10.2bn ($7.8bn) deal as the wave of consolidation sweeping North America’s battered oil and gas sector gathers speed.
The new company will be worth C$23.6bn, Cenovus said, making it Canada’s third-largest oil and gas producer with an output of 750,000 barrels a day concentrated in the bitumen-rich oil sands of northern Alberta, the biggest single source of US crude imports.
The transaction is the latest in a string of North American oil mergers as operators seek to consolidate and cut costs. The largest came last week when ConocoPhillips agreed to buy Concho Resources in a deal worth $9.7bn, marking another big bet on the future of US shale.
The plummeting oil price had caused shares in Cenovus to fall by more than 60 per cent since the start of January, and Husky’s by almost 70 per cent.
The deal was conceived as a nil-premium merger, but due to the divergence in share prices, Cenovus has agreed to pay a 21 per cent premium, or 23 per cent including warrants, to Husky shareholders. The transaction values Husky’s shares at about $3.8bn, or $10.2bn including debt.
“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,” said Alex Pourbaix, Cenovus’s chief executive.
The new company will be 61 per cent owned by Cenovus shareholders, with the reminder held by Husky’s investors. Two entities controlled by Mr Li, which own about 70 per cent of Husky at present, will emerge with more than 27 per cent of the new company’s common stock.
Mark Oberstoetter, head of North America upstream research at Wood Mackenzie, said the takeover meant Cenovus would now have enough refining capacity to handle the bulk of its own production, which could add some “natural hedging back into the portfolio”.
After the withdrawal of several international oil companies from the Alberta oil sands — where the high cost of producing bitumen, constant environmental opposition, and slow progress in building new pipeline infrastructure have deterred investors — the Cenovus deal points to the sector’s further consolidation in the hands of local companies.
Future dealmaking could see remaining oil sands interests held by Total, Shell, BP, and Chevron — which no longer consider the region strategic — targeted for acquisition by Canadian operators, Mr Oberstoetter added. “Calgary used to be an international hub, but we’ve lost that,” he said.
Both Cenovus and Husky were among oil-sands operators forced to shut some production this year as prices fell. The Alberta government, which offered to collaborate with the Opec cartel in its supply cuts earlier this year, has used a programme of so-called curtailments to restrict supply from operators, including Cenovus and Husky, to prevent production overwhelming local infrastructure.
Canada’s production of bitumen — ultra heavy oil that must be upgraded before refining into fuels — has attracted environmental opposition because of its carbon intensity and its vast ecological footprint in northern Alberta.
Insufficient pipeline capacity to ship growing volumes of oil-sands production to markets beyond North America has periodically forced deep discounts on Canadian exports. The low quality of Alberta’s oil also makes it cheaper. While US oil has traded at about $40 a barrel in recent weeks, the benchmark for Canadian oil has been priced at about $30 a barrel.
The companies said annual synergies created by the deal would amount to $1.2bn, largely achieved within the first year. Free cash flow would be achieved at a price of $36 for a barrel of West Texas Intermediate in 2021.
A new 12-person board will comprise eight directors from Cenovus and the remainder from Husky.
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
