Cenovus Energy Inc. (TSX: CVE) (NYSE: CVE) and Husky Energy Inc. (TSX: HSE) have announced a transaction to create a new integrated Canadian oil and natural gas company with an advantaged upstream and downstream portfolio that is expected to provide enhanced free funds flow generation and superior return opportunities for investors. 

The companies have entered into a definitive arrangement agreement under which Cenovus and Husky will combine in an all-stock transaction valued at $23.6 billion, inclusive of debt. The combined company will operate as Cenovus Energy Inc. and remain headquartered in Calgary, Alberta. The transaction has been unanimously approved by the Boards of Directors of Cenovus and Husky and is expected to close in the first quarter of 2021.

Transaction highlights:

• Accretive to all shareholders on cash flow and free funds flow per share
• Anticipated annual run rate synergies of $1.2 billion, largely achieved within the first year, independent of commodity prices
• Expected free funds flow break-even at West Texas Intermediate (WTI) pricing of US$36 per barrel (bbl) in 2021, and at less than WTI US$33/bbl by 2023
• Low exposure to Western Canadian Select (WCS) locational differential risk while maintaining healthy exposure to global commodity prices
• Increased and more stable cash flows support investment grade credit profile
• Net-debt-to-adjusted-EBITDA ratio of less than 2x expected to be achieved in 2022
• Anticipated quarterly dividend of $0.0175 per share (upon Board approval) and positioned for consistent growth
• Husky shareholders will receive 0.7845 of a Cenovus share plus 0.0651 of a Cenovus share purchase warrant in exchange for each Husky common share
• Integration Map. Credit Cenovus Energy

Management and Board Leadership – Committed to Successful Integration

The combined company will be led by a proven management team reflecting the strengths of both organizations, with a track record of strong safety performance, operational excellence and cost and capital discipline, along with downstream and midstream expertise. Alex Pourbaix will serve as Chief Executive Officer of the combined company, Jeff Hart will serve as Chief Financial Officer, Jon McKenzie will serve as the Chief Operating Officer and Keith MacPhail will serve as independent Board Chair.

Additional senior executives for the combined company will be selected from top talent at both companies and named by the close of the transaction.

The management team will be complemented by a Board of Directors consisting of eight directors identified by Cenovus and four directors identified by Husky.