Cenovus tumbles as C$5.7 billion Athabasca deal raises debt concerns

Cenovus Energy shares fell sharply on Monday as investors weighed the debt impact of its planned acquisition of Athabasca Oil and a same-day downgrade from UBS, adding to pressure from a weaker Canadian equity market and softer oil prices.

Cenovus shares fell as much as 5.3% to a session low of C$43.82 before paring losses to C$44.59, still well below Friday’s C$46.25 close.

The company agreed to acquire Athabasca in a cash-and-stock deal with an implied enterprise value of C$5.7 billion, offering Athabasca shareholders C$12 a share, a 14% premium to its 20-day volume-weighted average price.

The acquisition will give Cenovus full ownership of an existing partnership with Athabasca and add long-life oil sands production and more than 75 years of proved and probable reserves. Cenovus expects about C$85 million in annual corporate and commercial synergies, with most of those savings captured in the first full year after closing.

The deal will nevertheless push Cenovus’s debt above its stated target in the near term. Net debt stood at about C$3 billion at the end of the third quarter, while the company expects pro forma year-end 2026 net debt of C$5 billion to C$5.5 billion at strip pricing.

UBS downgraded Cenovus to Hold on Monday, adding to investor concerns over the balance-sheet impact of the acquisition.

The broader S&P/TSX Composite Index was down nearly 0.5%, pressured by weakness in major banks and mining stocks. Energy shares also came under pressure as oil prices retreated from recent highs, while elevated global bond yields kept concerns about inflation and fiscal risks in focus.

Original Article

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