Cenovus Energy Inc. is set to lay off one-quarter of its work force, and the controversial White Rose oil and gas development off the Newfoundland coast is very much in doubt, after the Calgary-based tar sands/oil sands producer announced over the weekend that it was buying rival fossil Husky Energy in a C$3.8-billion deal.
“The job losses could total around 2,150 positions, with the majority expected to be lost in Calgary,” the Globe and Mail reports, with details set to take shape as the new, expanded company finalizes its transition plan. “As with any merger of this type, there will be overlap and there will be some difficult decisions as we work to create a combined organization best positioned for the future,” said Cenovus spokesperson Sonja Franklin.
The Canadian Press says the combined company will be looking for annual savings of C$1.2 billion as a result of the buyout.
Alberta Jobs, Economy and Innovation Minister Doug Schweitzer said the province will help workers retrain and redouble its efforts to diversify its fossil-dependent economy. But not to diversify out of fossil fuels—the example he gave the Globe was of a fossil geologist interested in retraining as a data scientist.
“My heart goes out to the workers that have been impacted in this,” he said, adding later that fossil energy “is still going to be a huge part of the foundation of our economy.”
So far, Cenovus is making no promises about the White Rose development, 350 kilometres off the Newfoundland coast, for which Husky had been looking for a $2.2-billion government bailout. Husky spokesperson Kim Guttormson told the Globe Monday that all options for the site are on the table, and “accelerating abandonment remains a possibility.”
The buyout deal, which will make Cenovus Canada’s fourth-biggest fossil with about 660,000 barrels of oil or equivalent production per day, will help the company insulate itself from the low asking price for tar sands/oil sands bitumen by bringing in revenue from oil refining, analysts said.
“The combination of the two of them better balances the overall company,” said Richard Masson, executive fellow at the University of Calgary’s fossil-affiliated School of Public Policy, who called the deal a “blockbuster”.
“They’re less exposed to price fluctuations for heavy oil because they have refineries that will benefit [them] when heavy oil price is low,” Masson told CBC. “And so it helps stabilize their cash flow and allows them, hopefully, if they can achieve the synergies they’re striving for, to pay down their debt quicker and start growing again.”
“The deal does makes strategic sense,” wrote Credit Suisse Vice President Manav Gupta in an investors’ note. “Like U.S. [exploration and production companies], Canadian energy companies also need to come together, cut costs, and become leaner to better adapt to lower energy demand in the post-pandemic world.”
Investors were far less enthusiastic, The Canadian Press reports, with Cenovus shares losing 15% of their value after the announcement, before recovering to an 8.4% loss by the close of trading Monday.
Analysts expect to see a continuing wave fossil mergers and buyouts in the Alberta oilpatch, with larger companies like Suncor Energy and Canadian Natural Resources grabbing tar sands/oil sands properties that European fossils have been abandoning.