KEY POINTS
- Chevron sells its Canadian oil sands assets to Canadian Natural Resources for $6.5 billion.
- The sale is part of Chevron’s plan to raise $10 to $15 billion by 2028 through divestments.
- Canadian Natural will invest $400 million in the acquired assets and increase production by 122,500 boepd by 2025.
Chevron is selling its assets in Alberta’s Athabasca oil sands and Duvernay shale formation to Canadian Natural Resources for $6.5 billion in an all-cash deal. The sale is part of Chevron’s long-term strategy to raise $10 to $15 billion through asset divestments by 2028. The move also signals Chevron’s shift to focus on key regions such as U.S. shale and Kazakhstan.
Strategic Focus and Financial Flexibility
The asset sale strengthens Chevron’s financial position as it focuses on more strategic areas of its business. This includes regions like the Permian Basin in the U.S., where Chevron sees significant growth potential. Chevron’s Canadian operations contributed 84,000 barrels of oil equivalent per day (boepd) to its production last year.
However, selling these assets will provide more financial flexibility for the oil major as it faces ongoing competition with ExxonMobil over a $53 billion bid for Hess.
The sale is expected to close by December 6, 2024, subject to regulatory approvals. Chevron’s move to divest from Canada’s oil sands marks a continuation of a broader industry trend where oil majors shift away from higher-cost oil sands projects in favor of more profitable regions.
Canadian Natural’s Growth Prospects
For Canadian Natural Resources, this acquisition is a significant boost. After the deal, the company will hold 90 percent ownership in the Athabasca oil sands project, with Shell retaining the remaining 10 percent.
The addition of Chevron’s Duvernay assets will further increase Canadian Natural’s production, adding 122,500 boepd to its target production in 2025.
Canadian Natural expects to invest $400 million in expanding production from the acquired assets next year. Additionally, the company announced a 7 percent increase in its quarterly dividend, signaling strong cash flow expectations from the acquisition.
During a conference call, Canadian Natural’s executives highlighted how the acquisition aligns with their growth strategy and strengthens their production capacity in key regions. According to Reuters , the company’s shares rose nearly 3.7 percent following the announcement, reflecting investor optimism about the deal.
Wider Industry Impact
The sale is seen as part of a larger shift by oil majors away from high-cost operations in Canada’s oil sands. Analyst Allen Good from Morningstar noted that the divestment allows Chevron to move away from the oil sands, which are considered less competitive compared to other energy regions like the Permian Basin.
Additionally, the deal could impact the broader North American energy market, as Canadian Natural’s increased production will likely have ripple effects on the region’s oil supply. Canadian Natural’s focus on the Athabasca oil sands and the Duvernay formation puts it in a strong position to capitalize on higher oil prices.
Chevron’s decision also comes as it faces competition from ExxonMobil, particularly regarding Exxon’s $53 billion bid for Hess. While Chevron is not backing away from its strategic goals, this sale provides it with the financial flexibility to pursue other opportunities.
