Cenovus Energy Inc. is expanding its already substantial steam-driven oilsands portfolio through a $5.7 billion cash-and-stock acquisition of Athabasca Oil Corp., with its CEO noting recent government policy changes will facilitate production growth from the acquired assets.
Athabasca currently produces 40,000 barrels per day of oilsands, but Cenovus envisions scaling this up to 115,000 barrels per day by 2032, identifying it as a significant growth opportunity in the Canadian oilsands sector.
The acquisition follows the federal government’s classification of a planned million-barrel-a-day pipeline from Alberta to British Columbia as the first national interest project, streamlining its regulatory review process. Questions have arisen regarding whether Cenovus and other oilsands companies will invest adequately to fill the pipeline by its projected 2032 start date, along with other upcoming pipeline expansions.
CEO Jon McKenzie expressed optimism about the supportive government policies, noting they will enhance the sector’s competitiveness and enable growth initiatives at properties like Leismer and Corner in Athabasca’s asset portfolio. The recent tax deduction measures and anticipated royalty incentives in Alberta are expected to further accelerate oilsands production.
Under the agreement terms, Athabasca shareholders can choose between $12 in cash or 0.264 of a Cenovus common share per share they hold, with limits on the total cash and shares available. Desjardins Securities analyst Robert Mann views the acquisition as strategically compelling due to the scarcity of premium thermal resources and favorable conditions for oilsands development.
Analysts Michael Berger and Mark Oberstoetter highlight the significance of the deal in consolidating oilsands ownership among a few major Canadian companies, with Cenovus now holding a 21.5% share of total oilsands output. The transaction is set to close in December, subject to regulatory and shareholder approvals.
Cenovus shares closed down by three percent at $44.86, while Athabasca’s saw a 13.5% increase to $12.01 following the announcement.
