Cenovus (CVE) Creates Kaybob Duvernay JV With Athabasca
Cenovus Energy Inc. CVE and Athabasca Oil Corporation have announced the formation of a joint venture (JV) stand-alone company named Duvernay Energy Corporation.
This independent, self-funded entity aims to generate strong, high netback cash flow and production growth, with the expectation of unlocking significant value.
In this JV, Athabasca will hold a 70% equity interest in Duvernay Energy, while Cenovus will own the remaining 30%. To kickstart the creation of Duvernay Energy, Athabasca will contribute $22 million in seed capital and Cenovus will contribute $18 million.
The consolidation of assets will focus on the Kaybob Duvernay resource play in northwest Alberta, particularly in the volatile oil region. Presently, Duvernay Energy’s assets yield a daily production of 2,000 barrels of oil equivalent, with plans to expand to 25,000 barrels of oil equivalent per day by the end of the decade.
In addition to the company’s current JV assets, Duvernay Energy holds exposure to approximately 46,000 acres of 100% working interest-operated lands. These lands are contiguous to its existing Duvernay assets, further expanding the company's operational footprint and potential resource development.
In total, the company will have exposure to approximately 200,000 gross acres in the liquids-rich and oil windows, encompassing around 500 gross well locations.
Management of Duvernay Energy will be overseen by Athabasca through a management and operating services agreement. The effective date of the transaction is Jan 1, 2024, and the closing is expected to take place in the first quarter of 2024, subject to customary closing conditions and regulatory approvals.
For fiscal 2024, Duvernay Energy anticipates capital expenditure of $82 million. The funding for the expenditure will be sourced from the entity’s cash flow, as well as seed capital totaling $40 million.
Furthermore, Duvernay Energy stands to benefit from $20 million in expenditure linked to Athabasca’s fourth-quarter 2023 drilling operations. These operations pertain to a 100% working interest multi-well pad and long-lead inventory, which will be instrumental for future activities.
Zacks Rank & Stocks to Consider
Cenovus currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Ecopetrol has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The Zacks Consensus Estimate for EC’s 2023 and 2024 earnings is pegged at $2.32 and $2.41 per share, respectively.
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