Cenovus Energy Inc. has announced a $5.7 billion cash-and-stock deal to acquire Athabasca Oil Corp., expanding its existing steam-driven oilsands assets. The CEO of Cenovus believes that recent government policy changes will facilitate increased production from the newly acquired properties.
Athabasca currently produces 40,000 barrels per day from its oilsands, but Cenovus aims to boost this to 115,000 barrels per day by 2032, describing it as a significant organic growth opportunity in the Canadian oilsands sector. The acquisition aligns with the federal government’s recent classification of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project, streamlining its regulatory review process.
There have been speculations regarding whether Cenovus and other oilsands companies would commit to expanding production sufficiently to fill the upcoming pipelines by 2032. Cenovus’s CEO highlighted the positive steps taken by the federal and Alberta governments to enhance the sector’s competitiveness, emphasizing the potential impact on growth projects like those at Leismer and Corner.
Prime Minister Mark Carney’s announcement allowing businesses to immediately deduct a wider range of investments against taxes has the potential to accelerate growth projects, according to McKenzie. Additionally, forthcoming royalty incentives from the Alberta government are expected to further stimulate oilsands production.
Under the agreement terms, Athabasca shareholders can choose between receiving $12 in cash or 0.264 Cenovus common shares per share held, subject to cash and share availability limits. Desjardins Securities analyst Robert Mann views the acquisition as strategically compelling, citing the scarcity value of top-tier thermal inventory and a favorable environment for oilsands development.
Analyst Michael Berger noted that the deal’s valuation surpasses that of previous transactions, reflecting the growing importance of the oilsands industry in meeting long-term oil demands globally. With the consolidation of oilsands ownership into the hands of a few major Canadian companies, the market for oilsands mergers and acquisitions may cool down.
The acquisition elevates Cenovus’s share of total oilsands output to 21.5%, concentrating ownership among a small group of large-cap Canadian companies. The deal is expected to close in December, pending regulatory and shareholder approvals.
Cenovus shares closed down three percent at $44.86, while Athabasca’s shares rose by 13.5% to $12.01 following the announcement.