Cenovus Energy Inc. is expanding its steam-driven oilsands assets through a $5.7 billion cash and stock acquisition of Athabasca Oil Corp., with its CEO noting recent government policy changes will aid in unlocking production growth from the acquired properties.
Currently producing 40,000 barrels per day of oilsands, Athabasca is viewed by Cenovus as having the potential to increase production to 115,000 barrels per day by 2032.
During a conference call with analysts on Monday, CEO Jon McKenzie highlighted the significant organic growth opportunities present in the Canadian oilsands sector following the acquisition.
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 subject the pipeline to an expedited regulatory review process through the Major Projects Office.
Questions have arisen regarding whether Cenovus and other oilsands companies will commit to enough production growth to fill the pipeline by its planned start in 2032, along with other pipeline expansions slated for earlier completion.
McKenzie praised the positive steps taken by the federal and Alberta governments to enhance the sector’s competitiveness, emphasizing the potential impact on advancing growth projects like those at Leismer and Corner, two Athabasca assets to be included in Cenovus’ portfolio.
Recent government initiatives, such as the expanded tax deduction for investments announced by Prime Minister Mark Carney, are expected to accelerate growth opportunities for Cenovus.
Under the terms of the agreement, Athabasca shareholders will have the option to choose between $12 in cash or 0.264 of a Cenovus common share for each share they hold, subject to specified limits on cash and shares.
Analysts have noted the strategic importance of the acquisition, citing the scarcity value of top-tier thermal inventory and the favorable environment for oilsands development.
The acquisition marks another step in the consolidation of Canadian oilsands ownership, with Cenovus now holding a 21.5% share of total oilsands output.
The deal is anticipated to be finalized in December, pending regulatory and shareholder approvals.
Cenovus shares dipped by three percent to $44.86, while Athabasca’s shares surged by 13.5% to $12.01.
This acquisition underscores the ongoing consolidation trend in Canadian oilsands ownership, with a few large-cap companies now dominating the sector.
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