Cenovus Energy and Husky Energy are joining forces to create a more competitive energy company.

The two oil companies announced the merger on Sunday as they both try to become more competitive on the global market.

The agreement is expected to create savings of around $1.2 billion, largely achieved within the first year.

In total, the merger is valued to be around $23.6 billion.

Tim Pickering, CIO of Auspice Capital, tells Mix News this move shouldn’t shock anyone.

“It is a sign of the reality of how challenging the environment is and how companies are looking for ways to work together, ways to find synergies, and cost-efficiencies.”

Cenovus and Husky, like most oil companies, have had a tough time in 2020.

From the COVID-19 pandemic to the massive drop in oil prices, each has taken a hit financially.

In the second quarter, Cenovus lost $235 million with Husky seeing a small profit of $18 million.

Despite being in the green, Pickering believes Husky would have a tougher time down the road surviving the downturn in the economy.

“It’s going to take a lot to survive this and it’s going to be a lot harder for smaller players, there’s no doubt about it.”

This agreement may not be the last in the Canadian oilsands. Pickering believes it’s very possible we see more deals like this as smaller companies try and stay competitive.