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Cenovus (CVE) Creates Kaybob Duvernay JV With Athabasca

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Cenovus Energy Inc. (CVE - Free Report) 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.

Murphy USA’s (MUSA - Free Report) unique high-volume, low-cost business model helps it to retain high profitability, even in the fiercely competitive retail environment.

MUSA remains committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the fuel retailer recently approved a repurchase authorization of up to $1.5 billion, following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

The Williams Companies (WMB - Free Report) is a premier energy infrastructure provider in North America. WMB has a thriving deepwater transportation business. The company’s deepwater portfolio includes a 3,500-mile natural gas and oil gathering and transmission pipeline, and is important for future cash flows.

Williams Companies’ debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. It is also paying its shareholders an attractive dividend, yielding around 5%. Besides this, the company has a share repurchase program worth $1.5 billion, thus highlighting its commitment to shareholders.

Ecopetrol S.A. (EC - Free Report) operates across various segments of the oil and gas industry, including exploration, development and production of oil and gas, refining, transportation, and the sale of petroleum products.

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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