Cenovus and Husky lost more money than analysts expected and took impairment hits in the third quarter, the companies said on Thursday, adding concerns to a C$3.6 billion ($2.73 billion) merger announced days earlier.
Cenovus stock fell 6.5% while Husky's fell 7%, both among the top percentage decliners on S&P/TSX Composite Index. Cenovus is down 12% since announcing the deal Sunday, including an 8% selloff on Monday.
The deal requires approval by shareholders of both companies.
"I'm not very worried," Cenovus Chief Executive Alex Pourbaix told Reuters. "What you saw on Monday was a lot of people with very short-term bias get out of the stock. I'm quite happy to replace those investors with investors with a longer-term view."
COVID-19-related lockdowns have floored fuel demand and added to the woes of Canada's energy sector, pushing companies to look at consolidation and layoffs.
Len Racioppo, managing director of Cenovus shareholder Coerente Capital Management, said acquiring Husky and its refineries "watered down" the bet he made on oil prices rising through owning Cenovus, which mainly has production assets.
Husky reported a C$7.08 billion net loss compared with a year-ago profit of C$273 million, hurt by a C$6.7 billion impairment related to lower long-term price assumptions and reduced capital spending.
Husky's loss of 38 Canadian cents per share excluding items was bigger than analysts' average estimate of 24 Canadian cents, according to Refinitiv IBES.
Excluding items, Cenovus's 37 Canadian cents per share loss was wider than the expected 6 Canadian cents. It booked a C$450-million impairment on a U.S. refinery.
Credit Suisse analysts said Husky's struggle to generate free cash flow will weigh on the combined company.
($1 = 1.3186 Canadian dollars)
(Reporting by Arunima Kumar and Shariq Khan in Bengaluru and Rod Nickel in Winnipeg; Editing by Ramakrishnan M., Alexandra Hudson)
By Arunima Kumar and Rod Nickel