Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE) has agreed to buy BP’s remaining 50% stake in the Ohio-based Husky Toledo Refinery through its U.S. operating division. Since combining with Husky Energy in 2021, Cenovus has held 50% of the refinery. Upon completion of the transaction, which is anticipated to occur before the end of 2022, Cenovus’ U.S. operating division will take over operatorship from BP. In addition to the inventory value, the total price consists of $300 million in cash, subject to usual closing adjustments. In addition, the parties have signed a multi-year product supply agreement.
The Deal Will Provide More Synergies
According to Cenovus President & CEO Alex Pourbaix, “Fully owning the Toledo Refinery provides a unique opportunity to further integrate our heavy oil production and refining capabilities. Operating the refinery will open up additional synergies and capital efficiency opportunities, including connectivity with our nearby Lima Refinery. This transaction solidifies our refining footprint in the U.S. Midwest and increases our ability to capture margin throughout the value chain.”
The deal will increase Cenovus’ downstream throughput capacity by 80,000 barrels per day (bbls/d), including 45,000 bbls/d for heavy oil refining. It will also allow the business to integrate its upstream assets with its rich oil value chain to optimize it. As a result of the deal, Cenovus anticipates realizing synergies over the following several years, mainly concerning the optimization of feedstock and refined product sales, as well as the longer-term possibility of connecting the Toledo Refinery with Cenovus’s U.S. refining network.
A Strategic Addition to Cenovus Energy’s Downstream Operations
Keith Chiasson, Executive Vice-President, Downstream at Cenovus, declared that the refinery was a strategic addition to the company’s downstream operations. “This refinery is a strategic addition to our Downstream business. It has provided economic opportunities and critical energy products to the people of Ohio and surrounding areas for decades, and we look forward to continuing that tradition once we assume full ownership of the facility.”
The Toledo Refinery just finished a significant, every five-years turnaround. The turnaround, which the joint venture will fund, will increase operational dependability. The completion of this deal will increase Cenovus’ overall refining capacity to 740,000 bbls/d.
Featured Image: Megapixl @Piter2121
