Suncor exits three Newfoundland fields as Cenovus buys Athabasca for $5.7B

Suncor will sell its interests in three Newfoundland offshore developments to Ithaca Energy for $1.2 billion in cash, while Cenovus plans to acquire Athabasca Oil in a $5.7-billion cash-and-stock deal. Both moves come amid renewed attention to oilsands growth following the federal designation of a proposed Alberta-to-B.C. pipeline as a national-interest project.

Suncor Energy Inc. will sell its interests in three offshore developments off Newfoundland to U.K.-based Ithaca Energy PLC for $1.2 billion in cash, while Cenovus Energy Inc. has agreed to buy Athabasca Oil Corp. for $5.7 billion in cash and stock. The announcements came days after the federal government designated a proposed million-barrel-a-day pipeline from Alberta to British Columbia as its first national-interest project under legislation passed last year. The moves put a spotlight on whether oilsands companies will invest enough to fill the pipeline when it is expected to start operating around 2032, as well as other pipeline expansions scheduled to come online sooner.

Calgary-based Suncor announced the sale on Sunday. Ithaca will acquire Suncor’s interests in the Terra Nova, White Rose and West White Rose developments, with an additional contingent payment of up to $350 million tied to future oil prices. The transaction is expected to close in early 2027. A Suncor spokesperson said the company will retain its stakes in two other Newfoundland offshore oilfields, Hibernia and Hebron.

Suncor CEO Rich Kruger said the sale fits the company’s focus on its strongest opportunities. “This transaction further focuses our efforts on opportunities that generate the greatest long-term shareholder value,” Kruger said. “We are aligning our portfolio around our competitive advantages and the strengths of our unparalleled, physically-integrated business, underpinned by large-scale, long-life oilsands resources.”

Suncor also said it will increase share repurchases under its normal course issuer bid to $750 million per month from $500 million, beginning in October. Desjardins Securities analyst Robert Mann wrote in a report Monday that the sale could give Suncor more flexibility to speed up in situ development at projects such as Firebag and Lewis, particularly as conditions for the Canadian oilsands improve. In situ operations use steam wells to extract bitumen from deep underground instead of open-pit mining; they tend to be smaller, less costly and quicker to build than a new mine.

Cenovus, another major oilsands producer with East Coast assets, said it has no plans to change its Atlantic Canada holdings. CEO Jon McKenzie told analysts on a conference call Monday that the company operates the White Rose offshore field and its planned extensions, and is a partner in Terra Nova. He said production from the West White Rose expansion is “imminent.”

“I’m sure Suncor had their own reasons for doing what they did. We continue to see that as a profitable area of the world in which we exist. We understand what our footprint is there. We understand what our competitive advantage is within that footprint,” McKenzie said. “I don’t think it’s ever going to be something that is materially bigger than what we’ve got today, but we are excited about bringing on West White Rose and look forward to first production there.”

Cenovus’s Athabasca acquisition would add production and development opportunities in northern Alberta. Athabasca currently produces 40,000 barrels per day from oilsands operations, and Cenovus sees potential to increase that to 115,000 barrels per day by 2032. “That represents one of the most significant organic growth opportunities available in Canadian oilsands today,” McKenzie told analysts.

McKenzie said federal and Alberta policy changes could help the sector compete and support growth at Leismer and Corner, two Athabasca assets that would join Cenovus’s portfolio. Last month, Prime Minister Mark Carney announced businesses would be able to immediately deduct the cost of a broader range of investments against their taxes than before. McKenzie said the change “is not immaterial” to Cenovus’s ability to accelerate growth. He also pointed to royalty incentives the Alberta government expects to announce in November to encourage more oilsands production. “All of that fits together to draw capital back into the resource in the Athabasca Basin and probably accelerate growth as well,” he said.

Under the proposed deal, Athabasca shareholders can choose $12 in cash or 0.264 of a Cenovus common share for each share they hold, subject to limits on the total available. The cash portion is capped at $4.3 billion, and the share portion is limited to 44.4 million Cenovus shares. The company expects the deal to close in December, subject to customary conditions, including regulatory and shareholder approvals.

Mann said the deal comes at a high price but offers strategic value. “While the transaction does not come cheap … we view the acquisition as strategically compelling given the scarcity value of top-tier long-duration thermal inventory and the increasingly constructive backdrop for oilsands development,” he wrote. Cenovus completed another multibillion-dollar purchase less than a year ago, paying $8.6 billion for MEG Energy after a bitter bidding war with Strathcona Resources Ltd.

The proposed pipeline designation means the project will receive a streamlined regulatory review through the federal major projects office. Cenovus shares were down four per cent at $44.41 at midday Monday, while Athabasca shares were up almost 14 per cent at $12.04. The reporting included files from Canadian Press reporter Sarah Smellie in St. John’s, N.L.

Based on reporting by Global News Edmonton.