Cenovus Energy Inc. has announced a $5.7-billion cash-and-stock acquisition deal with Athabasca Oil Corp., expanding its extensive steam-driven oilsands portfolio. The company’s CEO expressed optimism about increased production growth potential in the acquired properties, aiming to boost Athabasca’s current 40,000 barrels per day oilsands output to 115,000 barrels per day by 2032.
During a recent conference call with analysts, CEO Jon McKenzie highlighted the significant organic growth opportunity present in the Canadian oilsands sector. This deal follows the federal government’s designation of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as the first national interest project, streamlining its regulatory review process through the Major Projects Office.
Questions have arisen regarding the readiness of Cenovus and other oilsands producers to ramp up production sufficiently to meet the pipeline’s capacity by 2032. McKenzie commended the government’s efforts to enhance sector competitiveness, emphasizing the positive impact on advancing growth projects like those at Leismer and Corner, two Athabasca assets included in the acquisition.
Recent government initiatives, such as allowing immediate tax deductions for investments, are expected to facilitate accelerated growth in the sector according to McKenzie. Additionally, upcoming royalty incentives from the Alberta government are anticipated to further stimulate oilsands production.
Under the acquisition terms, Athabasca shareholders can opt for $12 in cash or 0.264 of a Cenovus common share per share held, subject to cash and share availability limits. Analysts view the deal favorably, with Desjardins Securities highlighting the scarcity value of top tier thermal inventory and the positive outlook for oilsands development.
Michael Berger, a senior analyst at Enverus Intelligence Research, noted the premium valuation of the Athabasca deal compared to previous transactions, reflecting the increasing importance of Canadian oilsands in the global oil supply landscape. The acquisition consolidates Cenovus’ position in the market, further concentrating oilsands production among major industry players.
The deal, expected to close in December pending regulatory and shareholder approvals, reflects a broader trend of Canadian oilsands ownership consolidation among large-cap companies. Cenovus shares closed down three per cent at $44.86, while Athabasca’s rose 13.5 per cent to $12.01.
This acquisition aligns with the ongoing consolidation of Canadian oilsands ownership into the hands of a few major players, marking a significant milestone in the industry’s evolution.