Cenovus Energy Inc. is set to expand its substantial steam-driven oilsands portfolio through a $5.7-billion cash-and-stock transaction to acquire Athabasca Oil Corp. The company’s CEO expressed optimism about increased production potential from the newly acquired assets, aiming to boost Athabasca’s current 40,000 barrels per day output to 115,000 by 2032.
The strategic move follows recent government policy changes, including 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 streamline the regulatory review process through the Major Projects Office.
There have been concerns about the oilsands industry’s ability to meet the production demands of upcoming pipeline projects, but Cenovus remains confident in its growth prospects. CEO Jon McKenzie highlighted the positive impact of government initiatives on advancing growth projects, particularly at Athabasca’s Leismer and Corner assets.
Furthermore, McKenzie noted the significance of recent tax deductions for investments and anticipated royalty incentives from the Alberta government in boosting oilsands development. The agreement with Athabasca allows shareholders to choose between $12 in cash or 0.264 of a Cenovus common share per share held.
Market analysts view the acquisition as strategically compelling, given the scarcity of high-quality, long-term thermal assets and the favorable environment for oilsands development. The transaction’s valuation stands out compared to previous deals, reflecting the industry’s growing importance in providing oil resources amid global constraints.
Cenovus’s acquisition of Athabasca further consolidates ownership in the Canadian oilsands sector among a few major players. The deal is expected to close in December, pending regulatory and shareholder approvals.
Cenovus shares closed down three percent at $44.86 following the announcement, while Athabasca’s shares surged by 13.5 percent to $12.01, reflecting market reactions to the deal.