Cenovus Energy (TSE: CVE) is buying Athabasca Oil (TSE: ATH) in a $5.7 billion cash-and-stock deal.
The merger among the Canadian energy giants will expand Cenovus’ presence in Alberta’s oil sands and make it one of Canada’s largest crude producers.
The acquisition of Athabasca Oil comes after Cenovus acquired MEG Energy last year as it seeks to improve its efficiency, lower costs, and generate greater cash flow.
In a statement, Cenovus said that the Athabasca purchase will add about 45,000 barrels of crude oil equivalent per day to its production and give it more oil sands assets.
Athabasca Oil shareholders will receive 0.264 Cenovus shares for each share they own, valuing the deal at $5.76 billion.
The offer price of $12 per share is 13% above Athabasca Oil’s closing share price of $10.58 on Oct. 2.
The deal will be funded 75% in cash and 25% in Cenovus stock, with cash payments capped at $4.3 billion, reads the statement announcing the deal.
Cenovus adds that Athabasca’s assets in Alberta’s oil sands have more than 75 years of proved and probable reserve life and could result in oil production of 115,000 barrels per day by 2032.
The two companies’ boards of directors have approved the transaction, which is expected to close in December of this year subject to shareholder and regulatory approvals.
CVE stock has risen 90% in the last 12 months as oil prices have moved higher. The company’s shares currently trade at $46.25 each on the Toronto Stock Exchange.
