The CEO of MEG Energy Corp. says shareholders should continue to ignore a hostile takeover bid by Husky Energy Inc. because “by their own admission, Husky can afford to pay a lot more.”
Derek Evans, on his first financial reporting conference call since being named CEO earlier this year, says Husky’s $11-per-share cash-and-stock offer made in September is actually now worth just $9.61 because of changing share values.
He says the offer is opportunistic because MEG produces only raw bitumen from its steam-driven oil sands wells, making any production that can’t get to U.S. markets subject to severe – but temporary – price discounts for Western Canadian Select bitumen blend crude.
MEG announced Thursday it has signed a three-year deal with Cenovus Energy Inc. to move 30,000 barrels per day through its Edmonton-area crude-by-rail loading terminal to markets in the U.S. Gulf Coast where it expects to get better prices.
The Calgary-based company reported record production during the third quarter ended Sept. 30 of almost 99,000 barrels per day of bitumen, up from 83,000 bpd. in the same period last year.
Evans said it will advance a 20-day maintenance shutdown scheduled for next year to the current quarter to avoid current low prices, likely reducing fourth-quarter output by 4,000 to 6,000 bpd.
“We believe that MEG offers one of the greatest value propositions in the Canadian oil and gas business so it’s not a surprise that a company like Husky would see that value and want to participate in our assets, technology, people and our upside,” he said.
“The fact that Husky by their own statement has agreed just how valuable we are is flattering. However, everything comes at a price.”