Cenovus Energy Inc. is set to expand its existing oilsands assets through a $5.7 billion cash-and-stock agreement to acquire Athabasca Oil Corp. The company’s CEO anticipates a growth in production from the acquired properties, with plans to increase current oilsands output from 40,000 barrels per day to 115,000 barrels per day by 2032.
The recent government policy changes have been noted as key to unlocking production potential from the acquired assets. The federal government’s designation of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project, along with streamlined regulatory review processes, has set the stage for increased investment in the sector.
Cenovus CEO Jon McKenzie highlighted the positive impact of government efforts to enhance the sector’s competitiveness. He specifically mentioned upcoming royalty incentives and tax deductions that are expected to accelerate growth projects like those at Leismer and Corner, two assets from Athabasca that will become part of Cenovus’ portfolio.
Under the terms of the acquisition agreement, Athabasca shareholders will have the option to receive $12 in cash or 0.264 of a Cenovus common share for each share they hold, subject to certain limitations on total cash and shares available. Industry analysts view the acquisition as strategically compelling, emphasizing the scarcity value of high-quality, long-term thermal assets and the favorable environment for oilsands development.
The deal positions Cenovus as a significant player in the oilsands sector, with its share of total oilsands production increasing to 21.5 percent. The consolidation of oilsands ownership among a few large Canadian companies has been a trend over the past decade, with the current acquisition further concentrating production among major industry players.
The transaction is expected to be completed in December, pending regulatory and shareholder approvals. Cenovus shares closed down three percent, while Athabasca’s shares saw a 13.5 percent increase following the announcement of the acquisition deal.