Cenovus Energy Inc. is expanding its 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 acquired properties.
Athabasca currently produces 40,000 barrels per day from its oilsands operations, but Cenovus aims to boost this to 115,000 barrels per day by 2032. CEO Jon McKenzie expressed during a conference call with analysts that this opportunity represents significant organic growth potential within the Canadian oilsands sector.
This acquisition follows the federal government’s classification of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project. The streamlined regulatory review process for the pipeline, along with other upcoming pipeline expansions, has raised concerns about meeting production demands by 2032.
McKenzie highlighted positive steps taken by the federal and Alberta governments to enhance the sector’s competitiveness, which would benefit growth projects like those at Leismer and Corner, two assets from Athabasca joining Cenovus’ portfolio.
Additionally, McKenzie noted the impact of recent tax deductions for investments and upcoming royalty incentives in Alberta, which are expected to stimulate oilsands production and attract capital to the region.
Under the acquisition agreement, Athabasca shareholders can choose to receive $12 in cash or 0.264 of a Cenovus common share for each share held, subject to total cash and share availability limits. Despite the high cost of the transaction, analysts view the acquisition as strategically valuable due to the scarcity of top-tier thermal inventory and the favorable environment for oilsands development.
The deal further solidifies Cenovus’ position in the oilsands market, with its share of total oilsands output increasing to 21.5 percent. The consolidation of oilsands ownership among a few large-cap Canadian companies continues, emphasizing the industry’s shift towards concentrated ownership.
The transaction is expected to close in December, pending customary closing conditions and approvals from regulatory bodies and shareholders. Cenovus shares closed down three percent at $44.86, while Athabasca’s shares rose 13.5 percent to $12.01.
This latest acquisition signifies a notable development in the ongoing consolidation of Canadian oilsands ownership and the evolving landscape of the industry.