Cenovus Energy Inc. has announced a $5.7-billion cash-and-stock acquisition deal with Athabasca Oil Corp., aiming to bolster its existing steam-driven oilsands assets. The company’s CEO expressed confidence in the potential for increased production growth from the newly acquired properties, citing recent government policy changes as key enablers.

Athabasca currently produces 40,000 barrels of oilsands per day, but Cenovus anticipates scaling up production to 115,000 barrels by 2032. CEO Jon McKenzie emphasized the significant growth prospects available in the Canadian oilsands sector.

The acquisition follows the federal government’s classification of a proposed million-barrel-a-day pipeline from Alberta to British Columbia as a national interest project. This designation streamlines the regulatory review process, raising questions about industry readiness to meet the pipeline’s capacity by 2032 and other impending expansions.

McKenzie praised the federal and Alberta governments for actions aimed at enhancing the sector’s competitiveness, which he believes will facilitate the advancement of growth projects at the newly acquired Athabasca assets.

Additionally, recent tax deductions for business investments announced by Prime Minister Mark Carney are expected to accelerate growth initiatives, according to McKenzie. The Alberta government is also set to introduce royalty incentives to stimulate more oilsands production.

Under the terms of the agreement, Athabasca shareholders can opt for $12 in cash or 0.264 of a Cenovus common share per share held, with set limits on total cash and shares. Despite the acquisition’s cost, analysts view it as strategically compelling given the scarcity of top-tier thermal inventory and favorable oilsands development conditions.

The deal signifies a consolidation trend in Canadian oilsands ownership, with Cenovus now holding a 21.5% share of total oilsands output. The transaction is expected to close in December pending regulatory and shareholder approvals.

Cenovus shares closed three percent lower at $44.86, while Athabasca’s surged by 13.5% to $12.01.

This latest acquisition underscores the ongoing consolidation of Canadian oilsands ownership among a few large-cap companies, solidifying the industry’s landscape with major players.