As of January1,2024 Duvernay Energy will become a newly formed Canadian oil company.It will be formed by the combination of Cenovus (CVE) and Athabasca Oil(ATH).CVE will own 70% and ATH will own 30%.It will own 200,000 gross acres,most of it in the Montney and Duvernay region.It will inherit Kaybob acreage from Athabasca Oil and Cenovus Energy.Athabasca has 3 Duvernay pads in the Kabob region.Duvernay will own a pipeline network connected to Pembina Pipeline and Keyera Ppipeline.On January1,2024 Duvernay Energy will start off with production of 2000 boe/day.And the board will give guidance at the end of Q1 2024.
The new Duvernay Energy board will have a 4 man board with one member from CVE.And Duvernay will get $18 million of it's $40 million seed capital from CVE.Also Cenovus will contribute some of it's profitable Kaybob acreage to Duvernay Energy.In total, Cenovus will earn 30% of Duvernay's net income and own 30% of it's assets.
The opening production in Q1 2024 will be 2000 boe/day.A further 2 well pad will be producing in Q2 2024.Athabasca plans to have production of 6000 boe/day in 2025.This blog finds this to be a low forecast.However this could produce from $100 million to $125 million of revenue for Duvernay Energy in 2024.And Athabasca plans to have no debt on it's books for 2024.The average netback for thermal oil is $35-$39 a barrel.And Duvernay (especially Kaybob Duvernay ) assets have relatively high netbacks and low decline rates.
A Low Risk Investment
At this point in time it seems like the main way that investors can participate in Duvernay Energy is through Athabasca Oil and Cenovus Energy.However more leverage can be obtained by investing in Athabasca Oil (ATH) as no IPO ( an initial public offering of shares) has been mentionned yet for Duvernay.Although Duvernay is intended to be a separate entity from Athabasca, net income earned by Duvernay will be added to ATH.Capital and financing costs are minimal as there will be no debt and seed capital is added by ATH and CVE.Still this blog sees only moderate profits for Duvernay as it goes through startup costs.On the other hand if the price of oil gradually moves towards $80 a barrel and Duvernay netbacks increase, Athabasca Oil will likely hit $5.00 a share.
MarketBeat: Stock Market News and Research Tools Dale Mcintyre is a freelance writer that submits articles chiefly to Marketbeat.com and Zacks Research.
