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 believes recent government policy changes will facilitate increased production from the newly acquired properties.
Currently, Athabasca has an oilsands production of 40,000 barrels per day, but Cenovus envisions scaling this up to 115,000 barrels per day by 2032, presenting a significant organic growth opportunity in the Canadian oilsands sector. CEO Jon McKenzie highlighted this during a conference call with analysts.
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 under recent legislation. This designation streamlines the regulatory review process for the pipeline, raising questions about the ability of Cenovus and other oilsands companies to meet the pipeline demand by 2032.
McKenzie commended the federal and Alberta governments for taking positive steps to enhance the sector’s competitiveness, noting that these initiatives will support growth projects at assets like Leismer and Corner in Athabasca’s portfolio. He also acknowledged Prime Minister Mark Carney’s recent tax deduction measures as beneficial for accelerating growth.
Under the acquisition terms, Athabasca shareholders can choose to receive $12 in cash or 0.264 of a Cenovus common share for each share held, with limits on the cash and shares available. The total cash available is capped at $4.3 billion, while the number of Cenovus shares is restricted to 44.4 million.
Industry analysts view the Athabasca deal positively, with Desjardins Securities analyst Robert Mann describing it as strategically compelling due to the scarcity of top-tier thermal inventory and the favorable oilsands development environment. Similarly, Michael Berger of Enverus Intelligence Research highlighted the premium valuation of the deal, reflecting the growing importance of Canadian oilsands producers in the global oil market.
This acquisition further consolidates ownership in the Canadian oilsands industry among a few large-cap companies, with Cenovus now holding a 21.5% share of total oilsands output. The deal is expected to close in December, pending regulatory and shareholder approvals.
As a result of the news, Cenovus shares declined by three percent to $44.86, while Athabasca’s shares surged by 13.5% to $12.01, reflecting market reactions to the acquisition.