Cenovus to buy Athabasca Oil in $5.7-billion cash-and-stock deal

Cenovus Energy CVE-T said on Monday it would acquire Athabasca Oil ATH-T in a $5.7-billion cash-and-stock deal, expanding its presence in Alberta and cementing its position as one of Canada’s largest oil sands producers.

The acquisition builds on Cenovus’ purchase of MEG Energy last year, adding thermal assets as it seeks to improve efficiency, lower costs and generate stronger cash flows.

Thermal oil projects produce heavy crude using steam injection techniques that heat underground reservoirs, enabling the oil to flow to wells and be brought to the surface.

The deal will add about 45,000 barrels of oil equivalent per day to Cenovus’ production and give it more long-life oil sands assets near its existing operations.

Under the terms of the agreement, Athabasca shareholders will receive 0.264 Cenovus shares for each share they own, valuing the deal at about $5.76-billion, according to a Reuters calculation based on Athabasca’s 480.34 million shares outstanding, according to data compiled by LSEG.

The implied offer price of $12 per share is about 13.4 per cent above Athabasca’s last closing price on Friday.

The total consideration will be 65 per cent to 75 per cent cash and 25 per cent to 35 per cent Cenovus stock, with cash payments capped at $4.3-billion.

Cenovus said Athabasca’s Leismer and Corner assets have more than 75 years of proved and probable reserve life and could help lift thermal oil production to 115,000 barrels per day by 2032.

The transaction will also give Cenovus full ownership of Duvernay Energy, strengthening its position in the oil-rich Kaybob Duvernay area, where it sees potential to grow output to 20,000 barrels of oil equivalent per day.

The companies’ boards have approved the transaction, which is expected to close in December.