CALGARY�Husky Oil Ltd. and Renaissance Energy Ltd., both of Calgary, jointly announced on Monday that they've agreed to merge. The new company, Husky Energy Inc., will be Canada's second largest producer of oil and natural gas and its fourth largest downstream retailer.
Both Husky Oil and Renaissance say the new entity would have a pro-forma market capitalization of $7.2 billion (Can.), production of 252,000 boe/d, and total proven and probable reserves of more than 1.43 billion boe.
Terms of the agreement call for Husky to purchase up to 27.8 million shares of Renaissance at a price of $18 (Can.)/share. The maximum purchase price under the cash option is $500 million (Can.). Renaissance shareholders can also opt to receive one common share of Husky Energy stock in exchange for each share of Renaissance they own.
All Renaissance shareholders, including those who opt for cash, will receive a special return on capital of $2.50 (Can.)/share from Husky. The deal also includes a break fee of $82 million (Can.) should the deal be terminated.
Husky Oil and Renaissance shareholders will hold 65% and 35% interests, respectively, in the new company.
Based on annualized first quarter 2000 pro-forma results, Husky Energy will generate revenues of more than $5 billion (Can.), earnings of more than $485 million (Can.) and cash flow of $1.55 billion (Can.) in 2000.
Synergies
John C.S. Lau, CEO of Husky Oil, says the merger is a major step in realizing future growth potential. "The complementary nature of our respective assets creates a more diversified, balanced, and high-quality growth-oriented platform," said Lau. "We will be well-positioned to realize the full profit-generating potential of our high-growth opportunities in heavy oil, oilsands, and offshore [Canada's] East Coast."
The merger also will make Husky Oil well positioned to pursue its international projects, including those in Asia, says Husky.
Ronald G. Green, chairman of Renaissance's board and the company's acting CEO, says company officials have been indicating publicly for some time "that a merger was one way in which we might pursue the objectives of the strategic repositioning process we initiated a number of months ago." The combination will instantly move Renaissance into several new medium and long-term upstream operating areas as well as midstream and downstream activities. It also gives the company more balance in its risk and asset profiles. Renaissance's board has already approved the merger, says Green.
Husky Oil brings to the corporate marriage its significant heavy oil and infrastructure operations in the Lloydminster region along the Alberta-Saskatchewan border, including medium-heavy oil production of more than 54,000 b/d and 1,200 miles of pipelines with current throughput nearing 500,000 b/d. It holds interests in the Jeanne d'Arc basin off Newfoundland as well�72.5% interest in White Rose oil field and 12.5% in Terra Nova. Husky Oil also has a heavy oil upgrader producing 62,000 b/d of synthetic crude, operating in conjunction with a 25,000 b/d asphalt refinery. Almost 30% of Renaissance's crude oil production is within this region, creating the opportunity for significant synergies.
Husky Oil also produces 260 MMcfd of gas and holds a substantial interest in gas processing infrastructure, including a 72% working interest in the 430 MMcfd Ram River plant and an 11% interest in the 115 MMcfd Caroline plant. Both plants are in Alberta. These plants complement Renaissance's 400 MMcfd of mostly shallow gas production in the province.
