Key Points
- Chevron will sell Alberta assets to Canadian Natural Resources for $6.5 billion.
- The deal includes Athabasca Oil Sands and Duvernay Shale assets, contributing to Canadian Natural’s 2025 production targets.
- Canadian Natural raises its quarterly dividend, expecting immediate cash flow and earnings benefits from the deal.
- Chevron focuses on shifting capital to key global regions. Exxon and CNOOC are challenging its $53 billion acquisition of Hess.
Chevron Corporation announced Monday its decision to sell its assets in Alberta’s Athabasca Oil Sands and Duvernay Shale to Canadian Natural Resources Limited (CNRL) for $6.5 billion. This all-cash deal is expected to close by the fourth quarter of 2024 and is part of Chevron’s broader plan to divest $10 billion to $15 billion worth of assets by 2028.
The assets being sold contributed approximately 84,000 barrels of oil equivalent per day (boepd) to Chevron’s production in 2023. Chevron’s divestiture of these assets aligns with its strategy to focus its capital expenditures on key regions, such as U.S. shale basins, the Gulf of Mexico, the Eastern Mediterranean, Guyana, Australia, and Kazakhstan, where the company intends to allocate over 75% of its production budget.
Following this transaction, Canadian Natural Resources will control 90% of the Athabasca Oil Sands project, with Shell plc retaining ownership of the remaining 10%. Additionally, the Duvernay Shale assets are expected to significantly boost Canadian Natural’s production, adding around 122,500 boepd to its targeted output by 2025.
This acquisition strengthens Canadian Natural’s position in Canada’s oil industry, which has seen several major deals in recent years. According to Wood Mackenzie, the Duvernay Shale has recorded eight deals worth $2.9 billion over the last three years. Alongside the asset acquisition, Canadian Natural announced a 7% increase in its quarterly dividend to 56.25 Canadian cents per share, payable in January 2025. According to Chief Financial Officer Mark Stainthorpe, the deal is expected to boost the company’s cash flow and earnings immediately.
Chevron, meanwhile, is preparing for its larger $53 billion acquisition of Hess, a deal that recently cleared U.S. Federal Trade Commission (FTC) scrutiny. However, Chevron must still address a legal challenge by Exxon Mobil Corporation and CNOOC Limited, Hess’s partners in a Guyana joint venture. The dispute will be before a three-judge arbitration panel in May 2025.
Analysts at RBC Capital Markets noted that Chevron’s divestiture of these assets “helps clean up the portfolio ahead of the pending Hess closing.” They expressed optimism about improved free cash flow for Chevron by 2025. Chevron’s shares rose 1.1% in pre-market trading on Monday amid a favorable oil price environment.
