Cenovus CEO Alex Pourbaix announces a multi-year initiative focused on Indigenous communities near the company's oil sands operations in northern Alberta, at a news conference in Calgary on Jan. 30, 2020.Jeff McIntosh/The Canadian Press
The CEO of Cenovus Energy Inc. has warned investors to prepare themselves for a bumpy ride in first-quarter results as the company counts the costs of its merger with Husky Energy Inc.
In a fireside chat at the 2021 Scotiabank CAPP Energy Symposium, Alex Pourbaix said while he has been pleased with how the transition has gone so far, he wanted to issue “one modest little warning – Q1 is going to be noisy.”
When Cenovus and Husky announced their surprise merger in October, Mr. Pourbaix said he wanted to complete the bulk of integration activities in the first 100 days of the new, combined entity.
“I think we’ve really delivered on that,” he said Tuesday on a symposium webcast.
“But as a result, a lot of those costs are going to be focused in Q1 – severance, executive payouts, other deal charges, professional charges, things like that.”
Mr. Pourbaix said the majority of the integration cost around $500-million, which will be reflected in the company’s financial report ending March 31, 2021. He expects results to improve from the second quarter onward.
The new company is looking to save around $1-billion in operating and capital costs as a result of the merger, he said, adding Cenovus is “well on track” to hit that number.
However, he also said a pending sale of Husky’s chain of retail fuel stations was halted as part of the $3.8-billion all-stock takeover that closed early this year.
Mr. Pourbaix said the sale would have taken place at a low point in the fuel retailing cycle and was stopped in hopes that the market for those assets would improve.
In early 2019, Husky announced its plan to get out of retailing fuel to consumers after 80 years in the business, putting more than 500 service stations, travel centres, cardlock operations and bulk distribution facilities from British Columbia to New Brunswick on the block.
It struck a deal to sell its 12,000-barrel-per-day refinery in Prince George, B.C., in late 2019, but couldn’t find a buyer for the rest of the assets.
Higher oil prices will allow Cenovus to reach its debt reduction target of $10-billion by year-end, removing the need to sell assets, but Mr. Pourbaix said the company is continuing to sort its operations into core and non-core buckets.
He says Husky’s Asian-Pacific assets are also being assessed and are “not necessarily” going to be considered a core asset going forward. Husky has offshore natural gas projects with Chinese partner CNOOC Ltd. in China and Indonesia.
“The retail business, you know, it’s a great asset position of legacy Husky. We stopped that sale at the time of the deal – they were pretty advanced,” Mr. Pourbaix said.
“From my perspective, they were trying to sell at, really, what was the very bottom of the market. I just wanted to take the time to go back and reassess – did a sale really make sense? And if it makes sense, is there a better time to sell? And we’re probably moving into a lot better market.”
Mr. Pourbaix predicted that vaccine rollouts and an economic recovery in North America suggest the coming driving season could be “off the charts” – a promising prospect for the sale and also for refinery assets it purchased in the Husky deal.
With a report from The Canadian Press
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