Cenovus Energy Inc. is expanding its substantial steam-driven oilsands assets through a $5.7 billion cash-and-stock acquisition of Athabasca Oil Corp. The company’s CEO expressed optimism that recent government policy changes will facilitate increased production from the newly acquired properties.
Currently producing 40,000 barrels per day, Athabasca Oil Corp. presents an opportunity for Cenovus to boost production to 115,000 barrels per day by 2032. CEO Jon McKenzie highlighted this as a significant growth opportunity in the Canadian oilsands sector during a conference call with analysts.
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, streamlining its regulatory review process. Questions have arisen regarding whether Cenovus and other oilsands companies will invest sufficiently to fill this pipeline by 2032 and other upcoming pipeline expansions.
McKenzie commended the positive measures taken by the federal and Alberta governments to enhance the sector’s competitiveness, emphasizing the impact on advancing growth projects like those at Leismer and Corner, two assets from Athabasca set to be integrated into Cenovus’s portfolio.
Furthermore, recent policy changes allowing businesses to deduct a broader range of investments against taxes immediately are expected to accelerate growth. McKenzie also pointed to upcoming royalty incentives in Alberta aimed at stimulating oilsands production.
Under the terms of the agreement, Athabasca shareholders will have the option to receive $12 in cash or 0.264 of a Cenovus common share for each share held, with limits on the total cash and shares available. Analysts view the acquisition favorably given the scarcity value of premium thermal inventory and the positive outlook for oilsands development.
The deal significantly increases Cenovus’s share of total oilsands output to 21.5%, reflecting a trend of consolidation within the Canadian oilsands sector. The acquisition is expected to close in December, subject to regulatory and shareholder approvals.
Cenovus shares closed three percent lower at $44.86, while Athabasca’s shares rose 13.5% to $12.01.
In the ongoing consolidation of oilsands ownership, large Canadian companies such as Cenovus, ConocoPhillips, Canadian Natural Resources Ltd., Suncor Energy Inc., and Imperial Oil Ltd. now dominate the sector, with the majority of oilsands production remaining in Canadian hands.
The deal is seen as a strategic move amidst a changing landscape for oilsands development, with Cenovus positioning itself as a key player in the sector’s future growth.
