Cenovus Energy Inc. has announced a $5.7 billion cash-and-stock deal to acquire Athabasca Oil Corp., expanding its existing steam-driven oilsands assets. The CEO highlighted the potential for production growth, aiming to increase Athabasca’s current 40,000 barrels per day output to 115,000 by 2032, describing it as a significant organic growth opportunity in the Canadian oilsands sector.
The acquisition follows the recent federal government’s recognition of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project, streamlining its regulatory review process. Questions have arisen regarding whether Cenovus and other oilsands companies will invest sufficiently to fill the pipeline by its 2032 start date, along with other upcoming pipeline expansions.
CEO Jon McKenzie commended positive government initiatives aimed at enhancing the sector’s competitiveness, expressing optimism about advancing growth projects at Athabasca’s assets. He also noted the potential impact of recent tax deductions and upcoming royalty incentives in Alberta on accelerating growth in the oilsands industry.
Under the terms of the agreement, Athabasca shareholders can opt for $12 in cash or 0.264 of a Cenovus common share for each share held, subject to set limits on total cash and shares available. Despite the deal’s cost, analysts view it as strategically compelling due to the scarcity value of top-tier thermal inventory and the favorable oilsands development environment.
The acquisition signals a consolidation trend in Canadian oilsands ownership, with Cenovus now holding 21.5% of total oilsands output. 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 rose 13.5% to $12.01.