Cenovus Energy Inc. is set to expand its extensive steam-driven oilsands assets through a $5.7 billion cash and stock agreement to acquire Athabasca Oil Corp. The company’s CEO anticipates that recent changes in government policies will facilitate increased production from the acquired properties.
Athabasca currently produces 40,000 barrels per day of oilsands, but Cenovus envisions scaling this up to 115,000 barrels by 2032. CEO Jon McKenzie described this opportunity as one of the most significant avenues for organic growth within the Canadian oilsands industry.
The acquisition follows the federal government’s declaration of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as the first national interest project. This designation streamlines the regulatory review process for the pipeline, which is expected to be operational by 2032.
McKenzie praised the positive steps taken by the federal and Alberta governments to enhance the sector’s competitiveness. These measures are anticipated to accelerate growth projects like those planned for Athabasca assets Leismer and Corner.
Additionally, the recent announcement by Prime Minister Mark Carney allowing businesses to immediately deduct a broader range of investments against taxes is expected to expedite growth initiatives. McKenzie emphasized the significance of forthcoming royalty incentives from the Alberta government, further stimulating oilsands production.
Under the agreement, Athabasca shareholders can choose between receiving $12 in cash or 0.264 of a Cenovus common share for each share held, with limits on total cash and shares available. Analysts view the acquisition favorably due to the strategic value of acquiring top-tier, long-term thermal inventory and the positive outlook for oilsands development.
The deal is part of a trend where major Canadian companies are consolidating ownership of oilsands resources. With this acquisition, Cenovus now holds a 21.5% share of total oilsands output, further concentrating ownership among key industry players.
The transaction is expected to be finalized in December, contingent upon customary closing conditions and regulatory and shareholder approvals. Following the announcement, Cenovus shares closed three percent lower at $44.86, while Athabasca’s shares surged by 13.5% to $12.01.