Cenovus Energy Inc. is expanding its significant steam-driven oilsands portfolio through a $5.7 billion cash-and-stock acquisition of Athabasca Oil Corp. The company’s CEO mentioned that recent government policy changes will facilitate increased production from the newly acquired assets.
Currently, Athabasca has a daily oilsands production of 40,000 barrels, but Cenovus aims to boost it to 115,000 barrels by 2032. CEO Jon McKenzie described this as a major growth opportunity in the Canadian oilsands sector.
The acquisition follows the federal government’s classification of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project. This designation streamlines regulatory reviews for the pipeline, along with other upcoming pipeline expansions.
McKenzie highlighted the positive steps taken by the federal and Alberta governments to enhance the sector’s competitiveness. He specifically mentioned the impact of these steps on advancing growth projects such as those at Leismer and Corner, two assets from Athabasca.
Furthermore, recent government initiatives, including expanded tax deductions for investments and upcoming royalty incentives in Alberta, are expected to attract more capital to the oilsands sector, accelerating growth.
Under the acquisition agreement, Athabasca shareholders can choose between $12 in cash or 0.264 of a Cenovus common share for each share they own. Analysts view the deal as strategically compelling due to the scarcity value of premium thermal inventory and the favorable environment for oilsands development.
The transaction’s valuation surpasses previous deals, reflecting a higher market rating for Canadian oilsands producers amid growing importance in the global oil market. With this acquisition, Cenovus now holds a 21.5% share of total oilsands output.
The deal, subject to regulatory and shareholder approvals, is expected to close in December. Cenovus shares closed slightly down, while Athabasca’s shares rose significantly following the announcement.