Chevron to Sell Oil Sands, Duvernay Assets for $6.5B to Canadian Natural

Chevron Corp. has signed a deal to divest stakes in producing and undeveloped oil sand, liquid and natural gas properties in Alberta province to Canadian Natural Resources Ltd. for $6.5 billion.

The agreement, part of the United States energy giant’s plan to raise $10 billion to $15 billion from asset sales by 2028, consists mainly of Chevron’s 20 percent interest in the Athabasca Oil Sands Project (AOSP) and 70 percent stake in the Duvernay play. “The agreement also includes the acquisition of additional various working interests in a number of other non-producing oil sands leases with aggregate acreage of approximately 267,000 gross / 100,000 net acres”, Canadian Natural said in a statement.

The transaction’s AOSP portion, which includes the Muskeg River and Jackpine mines, the Scotford Upgrader and the Quest Carbon Capture and Storage facility, raises operator Canadian Natural’s stake to 90 percent. Shell PLC holds the remaining 10 percent.

The increase in Canadian Natural’s stake in the AOSP would add about 62,500 barrels per day (bpd) of “long-life no-decline” synthetic crude oil production, according to the Calgary, Alberta-based oil and gas producer.

In the Duverney acquisition, Canadian Natural aims to derive an average of 60,000 barrels of oil equivalent a day, consisting of 179 million cubic feet per day of natural gas and 30,000 bpd of liquids, in 2025.

“These acquisitions add targeted 2025 production of approximately 122,500 BOE/d, and the addition of approximately 1,448 MMBOE of Total Proved plus Probable reserves”, Canadian Natural said in the statement on its website.

Chevron said in a separate statement, “The assets subject to the agreement contributed 84 thousand boe/d of production, net of royalties, to Chevron in 2023”.

The parties expect to close the transaction by the end of 2024. The price, which is all cash, is subject to closing adjustments. Canadian Natural will absorb the affected employees at Chevron as part of the transaction.

Canadian Natural president Scott Stauth said, “We have made significant progress in driving efficiencies at AOSP over the last 7 years since the original acquisition in May 2017”. Stauth was referring to the company’s purchase from Shell.

“We expect further efficiencies and improved performance going forward as a result of our relentless focus on continuous improvement”, Stauth added. “The light crude oil- and liquids-rich Duvernay assets fit well with our current operations in the area and will drive significant value from our area knowledge and significant experience in this type of resource play.

“Both acquisitions provide Canadian Natural with immediate free cash flow generation and further opportunities to drive long-term shareholder value”.

Knowledge of the mines “eliminates the risks associated with a brownfield or greenfield project”, added Canadian Natural chief financial officer Mark Stainthorpe. “Given our strong balance sheet and significant free cash flow generation we are in an excellent position to take advantage of these opportunities that don’t come along very often”.

In Duvernay, “[t]here are greater than 340 net light crude oil and liquids-rich locations already identified with extensive infrastructure and available processing capacity, which depending on capital allocation, has a defined plan with potential to grow to 70,000 BOE/d by 2027”, Canadian Natural said.

The non-producing portion of the transaction involves Ells River, Pierre River, Namur and Saleski, where Canadian Natural is already a participant. Upon closing, Canadian Natural’s stakes in Ells River, Pierre River, Saleski and Namur — all in Alberta — increase to 90 percent, 90 percent, 83 percent and 65 percent respectively.

Boosted by the transaction, Canadian Natural raised its dividend for the next quarter by seven percent to $0.5625 per share, payable January 2025. Upon the completion of the transaction, it also intends to allot 60 percent of free cash flow to shareholders and 40 percent to its balance sheet until net debt hits $15 billion. “When net debt is between $12 billion and $15 billion, free cash flow will be allocated 75 percent to shareholders and 25 percent to the balance sheet and when net debt is at or below $12 billion, 100 percent of free cash flow will be allocated to shareholders”, Canadian Natural said.

Chevron said, “This transaction progresses Chevron’s previously announced plans to divest $10–15 billion in assets by 2028 to optimize its global energy portfolio”.

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