Cenovus Energy Inc. has announced a $5.7-billion cash-and-stock acquisition of Athabasca Oil Corp., expanding its steam-driven oilsands assets. The company’s CEO anticipates increased production growth following recent government policy changes.

Currently, Athabasca has a daily oilsands production of 40,000 barrels, but Cenovus aims to boost this to 115,000 barrels by 2032, identifying it as a significant growth opportunity in the Canadian oilsands sector. The federal government’s recent classification of a proposed million-barrel-a-day pipeline to British Columbia as a national interest project is expected to streamline regulatory processes, benefiting companies like Cenovus.

CEO Jon McKenzie highlighted the positive impacts of government initiatives on advancing growth projects, particularly at Athabasca’s Leismer and Corner assets. Recent tax deductions and upcoming royalty incentives are poised to accelerate oilsands development, enticing capital investment back into the Athabasca Basin.

Under the acquisition terms, Athabasca shareholders can opt for $12 in cash or 0.264 Cenovus common shares per share, with set limits on the total cash and shares available. Although the deal comes at a substantial cost, analysts view it as strategically compelling due to the scarcity and long-term value of thermal inventory in the oilsands sector.

This acquisition aligns with a broader trend of consolidation in the Canadian oilsands industry, with Cenovus now holding a 21.5% share of total oilsands output. The deal is expected to close in December, pending regulatory and shareholder approvals.

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

The acquisition positions Cenovus as one of the major players in the oilsands market, with industry analysts foreseeing a slowdown in future mergers and acquisitions as large-cap Canadian companies now dominate the sector.