Have a $32.00 target. GLTA
CENOVUS ENERGY INC.
Cenovus And Athabasca Create Duvernay Energy Corporation
Cenovus and Athabasca Oil entered into an agreement to contribute assets
into a newly formed pure-play entity, Duvernay Energy Corporation.
Duvernay Energy will be a standalone self-funded entity seeded with $40
million cash and a $50 million credit facility. The transaction will have an
effective date of January 1, 2024 and is expected to close in Q1/24. Current
production from the entity is ~2 MBoe/d (~75% liquids) with the company
targeting growth to ~25 MBoe/d in the late 2020s. We view this transaction to
be immaterial to Cenovus, but it provides some potential upside for an asset
that received no value within our numbers (or NAV).
Key Takeaways
• Ownership overview. Athabasca will own a 70% equity interest,
manage the entity, and receive three nominations for the Board of
Directors. Cenovus will own the remaining 30% and receive one Board
member nomination. Cenovus will contribute $18 million of the $40
million seed capital and its 22,000-acre Two Creeks Duvernay land
position to the new company.
• Duvernay Energy Corporation. The company’s assets are primarily
located in the volatile oil region with exposure to ~200,000 gross acres,
~500 gross future well locations and access to sufficient infrastructure.
Duvernay Energy will also own an 8.1% working interest in the 7-4-63-
16W5 gas facility.
• Valuation. Cenovus trades at a P/RNAV ratio of 74%, a 2024E
EV/DACF of 3.6x and a 2024E FCF yield of 19% vs. the large-cap group
at 85%, 4.5x and 16%, respectively.