Husky Energy (TSX:HSE) stock was up 12.43% in early afternoon trading on January 17. Shares surged on the news that the company had elected to abandon its hostile takeover of MEG Energy. MEG Energy, by contrast, was down over 35% in the same period of trading.
Husky said that it decided to pull out due to the lack of MEG board and shareholder support. The company also cited negative conditions in the market that may have influenced its decision. This includes the decision by the Alberta government to improve 325,000 barrels of day in production cuts in order to prop up the price of Western Canadian Select.
It also cited the "lack of meaningful progress on Canadian oil export pipeline developments".
In early January, Husky had also said that it is looking to sell off its retail assets after 80 years in the business. Husky has launched a strategic review that could result in a sell-off of its retail operations and its Prince George, B.C. refinery. Husky has more than 500 service stations across Canada.
These two developments may indicate that Husky is preparing for leaner times as Canadian growth has been downgraded in early 2019, largely due to struggles in the oil patch. Husky stock has climbed out of oversold territory, which it reached in late December. The recent news has pushed shares into oversold territory as it boasts an RSI of 70.
Husky’s prospects are mostly unchanged after the abandonment of the MEG Energy deal. However, shares look pricey after today’s gain and Husky is still vulnerable to shaky oil and gas prices.
