Athabasca Oil Corp. (TSX: ATH) and Cenovus Energy Inc. (TSX: CVE) have announced the creation of a new joint venture stand-alone company named Duvernay Energy Corp. The venture will consolidate the assets of the two companies in the prolific Kaybob Duvernay resource play located in northwest Alberta.
Under the agreement, Athabasca will hold a majority 70% equity interest in Duvernay Energy, while Cenovus will own the remaining 30%. The companies will collaboratively fund the venture, with Athabasca contributing $22 million in seed capital and Cenovus contributing $18 million. Duvernay Energy is expected to be a self-funded entity with seed capital of $40 million and a $50 million credit facility led by ATB Financial.
Duvernay Energy’s assets will include exposure to approximately 46,000 acres of 100% working interest operated lands, strategically acquired by Athabasca over the last 18 months, and Cenovus’s contribution of Kaybob acreage. The venture will operate in the volatile oil region, with a total exposure to around 200,000 gross acres and approximately 500 gross future well locations.
The current production from Duvernay Energy stands at 2,000 barrels of oil equivalent per day, with plans to expand it to 25,000 boe/d by the end of the decade. Athabasca will manage Duvernay Energy through a management and operating services agreement, and Duvernay’s board of directors will include three members nominated by Athabasca and one member nominated by Cenovus.
Commenting on the transaction, Athabasca Oil Corporation stated, “The transaction is aligned with Athabasca’s strategy to maximize cash flow per share growth and return capital to shareholders.” The company forecasts an adjusted fund flow of approximately $460 million in 2024, excluding its 70% equity interest in Duvernay Energy. Athabasca maintains its 2024 free cash flow forecast at around $325 million, with projections exceeding $1 billion in free cash flow between 2024 and 2026.
Duvernay Energy is expected to execute a self-funded development plan targeting growth to approximately 25,000 boe/d, with a focus on liquids. The 2024 development program includes 12 gross wells with a capital budget of around $82 million.
The transaction is set to have an effective date of January 1, 2024, and is anticipated to close in the first quarter of the same year, subject to customary closing conditions and regulatory approvals, including Competition Act approval. Upon closing, the companies will provide updated guidance for Duvernay Energy and Athabasca.
In conjunction with the transaction, Athabasca also announced the appointment of Bruce Beynon as Vice President Light Oil, responsible for the development of assets within Duvernay Energy. Robert Broen, President and CEO of Athabasca Oil Corporation, will assume the role of Chairman, President, and CEO of Duvernay Energy.
Information for this briefing was found via Seeking Alpha, Financial Times, St. Albert Gazette, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
