Cenovus Energy Inc. is set to expand its substantial steam-driven oilsands assets through a $5.7 billion cash-and-stock agreement to acquire Athabasca Oil Corp. The company’s CEO anticipates that recent government policy adjustments will facilitate increased production from the acquired properties.
Currently producing 40,000 barrels per day of oilsands, Athabasca could potentially boost its output to 115,000 barrels per day by 2032, according to Cenovus. CEO Jon McKenzie highlighted this as a significant growth opportunity within the Canadian oilsands sector.
The deal 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 under recent legislation. This designation will expedite the regulatory review process for the pipeline through the Major Projects Office.
Questions arose regarding whether Cenovus and other oilsands companies would commit to enough production expansion to fill the substantial pipeline by its anticipated launch around 2032, along with other pipeline expansions scheduled to become operational sooner.
McKenzie praised the government’s efforts to enhance the sector’s competitiveness, noting that these initiatives would positively impact the advancement of growth projects at Athabasca’s Leismer and Corner assets.
Additionally, McKenzie acknowledged the significance of Prime Minister Mark Carney’s announcement allowing businesses to deduct a broader range of investments against their taxes immediately, emphasizing its potential to accelerate growth.
The agreement offers Athabasca shareholders the choice to receive $12 in cash or 0.264 of a Cenovus common share for each share they hold. Desjardins Securities analyst Robert Mann described the acquisition as strategically compelling due to the scarcity and quality of the thermal inventory, as well as the favorable oilsands development landscape.
Michael Berger, a senior analyst at Enverus Intelligence Research, highlighted the premium paid by Cenovus for the Athabasca deal as reflective of the industry’s critical role in providing long-term oil resources amid increasing global demand.
With this acquisition, Cenovus now holds a 21.5% share of total oilsands output, consolidating ownership within a small group of large Canadian companies. The deal is expected to close in December, pending regulatory and shareholder approvals.
Cenovus shares closed down three percent, while Athabasca’s shares rose 13.5 percent following the announcement.