Cenovus Energy Inc. is expanding its steam-driven oilsands assets through a $5.7 billion cash-and-stock acquisition of Athabasca Oil Corp. The company’s CEO anticipates increased production growth from the acquired properties due to recent government policy changes.
Currently, Athabasca has an oilsands production of 40,000 barrels per day, with potential for expansion to 115,000 barrels per day by 2032, according to Cenovus CEO Jon McKenzie. The acquisition is seen as a significant growth opportunity in the Canadian oilsands sector.
The acquisition announcement follows the federal government’s classification of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as the first national interest project. This designation will streamline the regulatory review process for the pipeline through the Major Projects Office.
McKenzie praised the government’s efforts to enhance the sector’s competitiveness, citing positive steps taken by the federal and Alberta governments. These measures are expected to facilitate growth projects at Athabasca’s assets, including Leismer and Corner.
Additionally, McKenzie highlighted the impact of Prime Minister Mark Carney’s tax deduction policy, which allows businesses to deduct a broader range of investments immediately. He also mentioned upcoming royalty incentives from the Alberta government aimed at boosting oilsands production.
Under the agreement terms, Athabasca shareholders can opt for $12 in cash or 0.264 of a Cenovus common share per share owned. The transaction, although costly, is viewed as strategically compelling given the scarcity value of top-tier thermal inventory and the favorable oilsands development environment.
Analysts noted that the valuation of the Athabasca deal surpasses previous transactions, reflecting a higher estimation of Canadian oilsands producers’ value in the global oil market. The deal consolidates Cenovus’ position in the oilsands sector, with a 21.5% share of total oilsands output.
The transaction is expected to conclude in December, pending regulatory and shareholder approvals. Cenovus shares closed down three percent at $44.86, while Athabasca’s shares rose 13.5% to $12.01.
This acquisition marks a significant milestone in the ongoing consolidation of Canadian oilsands ownership among a few large-cap companies, shaping the future landscape of the sector.