Cenovus (CVE) Halts Husky Retail Fuel Station Sale: Here's Why
Cenovus Energy Inc. CVE recently put a pause to the awaited sale of the retail fuel station chain, which was received from the Husky Energy acquisition. The all-stock Husky Energy deal closed in early 2021, creating the third-biggest energy producer in Canada.
The company halted the sale as it expects the market to improve in the coming days. Divesting the assets at a lower stage in the fuel retailing cycle would have fetched reduced proceeds. Since the announcement of the retail fuel station chain divestment by acquiree Husky in the beginning of 2019, the energy market has witnessed a drastic change. Energy demand destruction caused by the coronavirus pandemic pushed the market to a low level last year. With multiple vaccine rollouts and reduction of travel restrictions, energy demand is now in the recovery path.
More than 500 service stations, distribution units, travel centers and cardlock operations were put up for sale by Husky. While the company fetched an offer to vend a refinery in Prince George of British Columbia — with a 12,000 barrel per day capacity — during 2019-end, the remaining assets failed to obtain any buyer. Notably, Cenovus expects crude price recovery to enable it to decrease debt load. The company has a debt reduction goal of $10 billion by 2021-end. Higher commodity prices will likely omit the requirement of divesting assets. However, Cenovus is not expected to view Husky's Asian-Pacific assets as core assets, per The Canadian Press.
Following the Husky acquisition, the combined entity is now expected to have a production capacity of 750 thousand barrels of oil equivalent per day (MBoe/d). In terms of refining and upgrading, the entity is expected to be the second largest in Canada. It has a total upgrading and refining capacity of 660 MBoe/d, along with crude storage capacity of 16 million barrels.
Price Performance
The stock has surged 90.4% in the past six months compared with 51% rise of the industry it belongs to.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include CrossAmericaPartners LP CAPL, Covanta Holding Corporation CVA and Equinor ASA EQNR, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CrossAmerica’s bottom line for first-quarter 2021 is expected to surge 166.7% year over year.
Covanta Holding’s bottom line for 2021 is expected to surge 109.5% year over year.
Equinor’s bottom line for first-quarter 2021 is expected to rise 111.8% year over year.
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