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 oilsands 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.
It reported New York-traded West Texas Intermediate crude prices increased almost 45 per cent versus the third quarter of 2017, while Western Canadian Select bitumen blend crude increased only 23 per cent, resulting in the difference widening to an average of US$22.25 per barrel compared with US$9.94 a year earlier.
MEG announced Thursday it has signed a three-year deal with Cenovus Energy Inc. to move 30,000 barrels per day (bpd) through its Edmonton-area crude-by-rail loading terminal to markets in the U.S. Gulf Coast where it expects to get better prices.
Cenovus recently signed a three-year deal with Canada’s two major railways to move 100,000 bpd to the U.S. Gulf Coast to be refined. Shipments from a second terminal in central Alberta are to begin next year.
MEG 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.”
— With files from Dan Healing, The Canadian Press