Concerns are being voiced over a mega-merger between two energy giants this past weekend.
Calgary-based Cenovus Energy Inc. announced on Sunday it intended to buy Husky Energy Inc. for about $3.8 billion in an all-shares deal.
Calgary Mayor Naheed Nenshi told Global News that from a purely business perspective, the merger makes sense and will help Cenovus grow and prosper in the future, but he’s concerned about the impact on jobs.
“It will almost certainly signal job losses,” he said. “And many of those job losses will be based in downtown Calgary.”
Right now both companies have a large presence in Calgary. Nenshi is concerned what a merger might do to an already sky-high office vacancy rate as well as the tax base.
“Oh it’s going to be bad depending on those job losses,” Nenshi added. “When you have two large companies become one, they likely will need less space.”
Energy policy analyst David Yager agreed some jobs could be lost — initially CEOs and other department heads — followed by other workers.
“How far it trickles down remains to be seen,” he said.
“At the field level, those jobs are pretty secure. At the head office level, obviously the administration, we’ll see how that goes.”
Read more: Cenovus to buy Husky Energy for $3.8B in shares; company will remain in Alberta
Combining the companies will create annual savings of $1.2 billion, largely achieved within the first year and independent of commodity prices, the companies said.
About $400 million of the savings are expected to come from “workforce optimization,” along with savings from IT and procurement, said Cenovus CEO Alex Pourbaix, who will head the merged entity.
Pourbaix did not explicitly say there would be job losses.
“When you combine two companies with similar geographies and somewhat similar operations, you’re always going to have some overlap,” he added.
“In this case, there would probably be relatively a little more weight on the head office functions, just because we aren’t quite as overlapping in the field.”
Global News also reached out to Husky Energy.
Kim Guttormson, manager of Communication Services, said in a statement: “We have identified significant, readily achievable and sustainable cost efficiencies across the two organizations that we believe will position the company for success and allow us to meaningfully contribute over the long term to the economies of our operating areas.”
Guttormson also added out of respect for the staff, Husky would be speaking to them before publicly commenting on potential job impacts.
Read more: Cenovus Energy shares plummet on news of its $3.8B deal to buy Husky Energy
This latest energy merger creates the third-largest Canadian oil and natural gas producer by total production. Yager said it also puts more Canadian oil production “firmly” in the hands of a Calgary-based company.
“In the end, finding ways for the people that produce the oil to be more profitable and stay in business is really important for the long-term health of the industry,” he added.
“So it’s short-term pain for everyone, but there’s a lot of that going around.”
Nenshi said he hopes Cenovus thinks long-term and doesn’t shrink its workforce or presence too much.
The transaction has been approved by both boards and is expected to close in the first quarter of 2021, pending shareholder and regulatory approvals.
With files from The Canadian Press
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