Cenovus Energy Inc. CVE recently closed the previously announced strategic merger with Husky Energy. The all-stock accord has created the third-biggest energy producer in Canada. The combined entity is headquartered in Calgary.
Shareholders of Husky Energy received 0.7845 Cenovus shares for each share they hold and 0.0651 of a Cenovus common share purchase warrant. Moreover, the preferred shareholders of Husky Energy got one Cenovus preferred share for each of their preferred shares, in accordance with similar terms.
The deal was announced on Oct 25, 2020, which stated that the integrated company was expected to have a liquidity of C$8.5 billion in undrawn credit facilities. The entity will have no bond maturities till 2022. Moreover, Cenovus’ board was expected to approve a quarterly dividend of 1.75 Canadian cents per share.
The combined entity is expected to have a production capacity of 750,000 barrels of oil equivalent per day (Boe/d). In terms of refining and upgrading, the combined entity is now the second largest in the country. It has a total upgrading and refining capacity of 660,000 Boe/d, along with crude storage capacity of 16 million barrels. The merger is expected to enable Cenovus to better navigate through the current low margin environment in the fuel market.
The combined entity is expected to provide an ambitious environmental, social and governance plan by late-2021. It expects to achieve net-zero emissions by 2050. The move will likely give an elaborate picture of capital budget and corporate guidance at the end of this month. The transaction is expected to create annual synergies of C$1.2 billion and reduce overhead costs, which will enable the company to boost shareholder value.
The stock has gained 32.3% in the past six months compared with 4.6% rise of the industry it belongs to.
Zacks Rank & Stocks to Consider
Cenovus currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include TC PipeLines, LP TCP, Suncor Energy Inc. SU and Summit Midstream Partners, LP SMLP, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TC PipeLines’ bottom-line estimates for 2021 have increased nearly 4% in the past 60 days.
Suncor’ sales for 2021 are expected to jump 18.3% year over year.
Summit Midstream’s bottom-line estimates for 2021 have increased 24% in the past 60 days.
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