Cenovus Energy Inc. announced Sunday it would take over Canadian oil and gas rival Husky Energy Inc., combining two of the country’s top producers, in a share swap valued at C$3.8 billion ($2.85 billion). Total estimated value of the transaction, including debt, is C$23.6 billion ($17.7 billion).

oil sands Canada production

The run rate synergies achieved by the corporate marriage of Cenovus and Husky are expected to annually save C$1.2 billion ($900 million) in combined costs of administration and operations in Canada, the United States and overseas, the independent producers predicted.

“We will be a leaner, stronger and more integrated company, exceptionally well suited to weather the current environment and be a strong Canadian energy leader in the years ahead,” said Cenovus President Alex Pourbaix.

Husky President Rob Peabody said integrating the in situ oilsands assets of Cenovus “with Husky’s extensive North American upgrading, refining and transportation network and high netback offshore natural gas production, will create a low-cost competitor and support long-term value creation.”

About half of the forecast cost savings are forecast to be generated by shaving more than C$600 million ($450 million) off combined annual capital spending on natural gas and oilfield supply operations and refineries, executives said.

With oil and natural gas output equivalent to 750,000 boe/d, Cenovus would become the third-biggest producer of Canadian fossil fuel resources after Canadian Natural Resources Ltd. and Suncor Energy Inc. Counting Husky interests in China and Indonesia, the new pairing ranks No. 2 in total Canadian-owned flows.

Natural gas liquids dominate the combination. Cenovus has capacity for about 417,000 b/d and Husky has about 208,000. The pair’s natural gas production capacity adds up to 674 MMcf/d.

The combination would have interests in six refineries, with Wood River in Illinois, Borger in Texas, Superior in Wisconsin, Toledo and Lima in Ohio, and Lloydminster on the border between Alberta and Saskatchewan.

The takeover is scheduled to close in early 2021. The deal commits Cenovus to trade 0.7845 of each share for each Husky stock, a 21% premium over current trading.

The boards of each company have unanimously approved the takeover. Husky’s Chinese 70% owner, a trust belonging to the Li Ka-shing business family in Hong Kong, has agreed to the transaction.

Several big mergers have been announced recently by U.S.-based producers. 

On Monday, Houston-based Contango Oil & Gas Co. announced an all-stock merger with Mid-Con Energy Partners LP. Contango works the shallow waters of the Gulf of Mexico and across the Lower 48, mostly in Louisiana, Oklahoma, Texas and Wyoming. Mid-Con focuses on enhanced oil recovery primarily in Oklahoma and Wyoming. 

Last week ConocoPhillips said it planned to take over Concho Resources Inc. for $9.7 billion in stock, forming a giant in the Permian Basin.  Also last week Dallas-based Permian pure-play Pioneer Natural Resources Co. agreed last week to join forces with competitor Parsley Energy Inc. in an all-stock deal valued at $7.6 billion including debt.

Chevron Corp. also is planning to purchase Noble Energy Inc., while Devon Energy Inc. is taking over WPX Energy Inc.