Cenovus bulks up on oil sands with $5.7-billion Athabasca buy

Cenovus Energy Inc. CVE-T will acquire rival oil sands producer Athabasca Oil ATH-T for roughly $5.7-billion, the Calgary-based company announced Monday.

The deal represents something of a doubling down in the oil sands for major producers. It made the announcement roughly 12 hours after fellow oil producer Suncor Energy Inc. SU-T said it would sell its assets off the coast of Newfoundland and less than one year after the Cenovus acquired MEG Energy.

Acquiring Athabasca adds “a high-quality oil sands resource base with decades of development potential ahead of it” to Cenovus’s portfolio, the company’s chief executive Jon McKenzie said Monday morning on a conference call.

The deal will initially add roughly 45,000 barrels a day of production to Cenovus’ books, but Mr. McKenzie said the company sees an opportunity to increase thermal production to approximately 115,000 barrels a day by 2032.

“That represents one of the most significant organic growth opportunities available in Canadian oil sands today,” he said.

The Athabasca assets are also close to existing undeveloped resources Cenovus already owns, including Thornberry and May River, which together hold an estimated 550 million barrels of oil.

“This transaction creates the possibility, in time, to access those resources without building a new greenfield processing facility,” Mr. McKenzie said.

Cenovus expects to finance the deal by 65 per cent to 75 per cent cash, and 25 per cent to 35 per cent shares. The transaction is expected to close in December.