Cenovus strikes $5.7-billion deal for Athabasca Oil as Suncor sells N.L. offshore stakes

Cenovus Energy Inc. has agreed to buy Athabasca Oil Corp. in a cash-and-stock deal with an implied enterprise value of $5.7 billion, the Calgary company announced Monday, a day after Suncor Energy Inc. agreed to sell its stakes in three Newfoundland and Labrador offshore oilfields to Britain’s Ithaca Energy plc for $1.2 billion up front plus up to $350 million more tied to oil prices. Together, the two transactions show Canada’s largest integrated producers concentrating capital on long-life oilsands barrels.

Cenovus will pay $12 per Athabasca share. Shareholders may elect $12 in cash, 0.264 of a Cenovus share or a mix, subject to pro-ration under caps of $4.3 billion in cash and 44.4 million Cenovus shares, so the total will be 65 to 75 per cent cash. Athabasca said the price is a 14 per cent premium to its 20-day volume-weighted average and 25 per cent above its proved-plus-probable after-tax net asset value, implying an equity value of about $5.8 billion. Cenovus shares closed Friday at $46.25 on the Toronto Stock Exchange and Athabasca at $10.58, The Canadian Press reported.

The deal adds about 45,000 barrels of oil equivalent per day, including thermal production close to Cenovus’s Christina Lake, May River and Thornbury assets. Cenovus cited more than 75 years of proved-plus-probable reserve life at Athabasca’s Leismer and Corner oilsands properties, a pathway to 115,000 barrels a day of thermal output by 2032 and about $85 million a year in corporate and commercial synergies. It also consolidates Duvernay Energy Corp., a light-oil venture 70 per cent owned by Athabasca, which Cenovus says could grow to a sustained 20,000 boe/d. “This transaction strengthens our position in one of the world’s premier oil-producing regions,” chief executive Jon McKenzie said.

Athabasca chief executive Rob Broen said the deal “recognizes the value our team has created,” noting total shareholder returns above 1,000 per cent over five years. The company put the price at $127,000 per barrel of oil equivalent per day of production and 10.2 times debt-adjusted funds flow, based on a strip that assumes US$85 West Texas Intermediate crude. It expects Cenovus to accelerate Corner phases 2 and 3 and further Leismer expansions beyond Athabasca’s standalone timeline.

Cenovus will fund the cash with cash on hand and short-term borrowing and said its $4-billion net-debt target is unchanged. Net debt was about $3 billion at the end of the third quarter and is projected at $5 billion to $5.5 billion at year-end including the deal. Athabasca plans to mail its circular in early November ahead of a shareholder vote in late November. The arrangement also needs approval from the Court of King’s Bench of Alberta and clearance under the Competition Act, with closing targeted for December. Both boards approved the deal unanimously, and Athabasca’s directors and officers have agreed to vote their shares in favour.

In the East Coast deal, Suncor said Sunday it will sell its 48 per cent interest in Terra Nova, 40 per cent of White Rose and 38.6 per cent of West White Rose for $1.2 billion (US$860 million) plus a contingent payment of up to $350 million (US$250 million). Ithaca will assume all future liabilities, including a $500-million well compliance program at Terra Nova starting in 2027 and an estimated $1.4 billion in abandonment and lease liabilities, and intends to take over as Terra Nova operator. Suncor keeps its stakes in Hebron and Hibernia and raised its share buybacks to $750 million a month from $500 million starting this month. “We are aligning our portfolio around our competitive advantages,” chief executive Rich Kruger said.

For Ithaca, a large U.K. North Sea producer, the purchase is its first international acquisition. It expects the assets to average about 30,000 boe/d from 2027 to 2031, peaking at 35,000 to 40,000 in 2029 as West White Rose, operated by Cenovus, starts commercial production in the fourth quarter of 2026. The contingent payment depends on average Brent prices topping annual reference levels of US$80, US$74 and US$73 a barrel over three periods ending in September 2028. Completion is targeted for the first half of 2027, subject to Competition Act approval.

Fred Hutton, the Liberal energy critic in Newfoundland and Labrador, told CBC Radio’s The St. John’s Morning Show his party’s main concern is jobs and that it will raise the sale with Suncor and in the House of Assembly, though he said a new company’s interest could be a positive sign for the province, CBC News reported. Provincial Energy Minister Lloyd Parrott was not available for an interview Monday morning.

Sources: Cenovus news release; Athabasca Oil news release via Financial Post; CBC News / The Canadian Press; Suncor news release; Ithaca Energy news release; CBC News N.L..