Chevron to Sell Oil Sands, Shale Assets to Canadian Natural for $6.5 Billion — Update

By Robb M. Stewart and Sherry Qin

Chevron is selling its stakes in some oil-sands and shale assets to Canadian Natural Resources for $6.5 billion, driving ahead with its effort to refocus its operations and adding to the wave of consolidation in Canada's energy-rich West in recent years.

Chevron Canada, a subsidiary of the San Ramon, Calif., oil major, said Monday it agreed to sell its 20% interest in the Athabasca Oil Sands Project and a 70% interest in the Duvernay shale. Both are located in the province of Alberta.

The all-cash transaction, which has an effective date of Sept. 1, is expected to close by the end of the year.

The deal marks a big step in Chevron's plans to sell $10 billion to $15 billion in assets by 2028 as it focuses on areas such as the Permian Basin in the U.S., and in Kazakhstan. Chevron also is working to close a $53 billion deal to buy Hess, the latest megamerger among U.S. producers taking advantage of strong crude prices and securing future oil reserves.

Chevron said the assets being sold to Canadian Natural contributed production of 84 thousand barrels of oil equivalent a day, net of royalties, in 2023. The sale also includes additional working interests in other non-producing oil-sands leases covering about 100,000 net acres.

The purchase will boost Canadian Natural's stake in the Athabasca Oil Sands Project to 90%, adding about 62,500 barrels a day of synthetic crude-oil production. Chevron's controlling interest in light oil and liquids-rich assets in the Duvernay play that Canadian Natural agreed to buy are targeted to produce 60,000 boe/d in 2025.

Canada's big oil-sands producers have been riding high, with the sector attracting deal-making as oil prices have been buoyed by demand, geopolitical tensions and production cuts by Organization of the Petroleum Exporting Countries and allies.

Interest among producers also has been heightened since the Trans Mountain pipeline became operational in May, the twin of an existing line built in the 1950s. Together they can triple shipments of Alberta oil to the Pacific Coast and to Asian markets to 890,000 b/d.

Canadian Natural said it expected both producing assets to boost free-cash-flow generation. With the Chevron deal, the Calgary, Alberta, oil-and-gas producer said it was raising its quarterly cash dividend by 7% from the January payout, the 25th consecutive year Canadian Natural has increased its dividend. As debt levels are cut following the acquisition, the company said it plans to steadily direct more of its cash flows toward shareholders.

Canada's energy companies have been moving to grab assets in oil and gas-rich pockets in the West, echoing the much bigger deals reshaping the Permian and other basins in the U.S.

A year ago, Suncor agreed to buy the Canadian operations of France's TotalEnergy for a little over $1 billion to bolster its oil-sands business in northern Alberta, and offer it a replacement for a big, aging oil-sands mine. That same month, natural -gas producer Tourmaline Oil agreed to buy Bonavista Energy for almost $1.1 billion. In May 2023, Crescent Point Energy completed the purchase of Spartan Delta's oil-and-gas assets in the Montney region of Alberta for about $1.2 billion.

In premarket trading Monday, Chevron shares were up 1.2%, while Canadian Natural's shares were up 2% on the New York Stock Exchange.

Write to Robb M. Stewart at robb.stewart@wsj.com and Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

October 07, 2024 09:01 ET (13:01 GMT)

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