Chevron Divests $6.5 Billion in Canadian Assets to Canadian Natural Resources

Chevron Corporation has announced a significant divestiture, selling its assets in the Athabasca Oil Sands and Duvernay shale to Canadian Natural Resources Limited for $6.5 billion. This strategic move is part of Chevron's broader plan to streamline its global energy portfolio and focus on more lucrative regions.

Key Takeaways

• Chevron sells a 20% non-operated stake in the Athabasca Oil Sands Project and a 70% operated interest in the Duvernay shale.
• The deal is part of Chevron's strategy to divest $10 billion to $15 billion in assets by 2028.
• Canadian Natural Resources expects to increase its production significantly with this acquisition.
• The transaction is expected to close in the fourth quarter of 2024, pending regulatory approvals.

Details of the Transaction

Chevron's decision to sell its Canadian assets is a calculated step in its ongoing strategy to optimize its operations. The assets being sold include:

• 20% non-operated stake in the Athabasca Oil Sands Project.
• 70% operated interest in the Duvernay shale, along with related Alberta assets.

These assets contributed approximately 84,000 barrels of oil equivalent per day to Chevron's production in 2023. The sale is expected to enhance Canadian Natural Resources' production capacity by adding around 122,500 barrels of oil equivalent per day by 2025.

Strategic Implications

This divestiture aligns with Chevron's goal to raise funds through asset sales, allowing it to focus on more profitable ventures, particularly in the U.S. shale and Kazakhstan. The company aims to divest between $10 billion and $15 billion in assets by 2028, which will help streamline its operations and improve financial flexibility.

Scott Stauth, President of Canadian Natural Resources, expressed confidence in the acquisition, stating that the assets fit well with their existing operations and would drive significant value. The deal is expected to be immediately accretive to Canadian Natural's cash flow and earnings.

Market Reaction

Following the announcement, shares of both Chevron and Canadian Natural Resources saw positive movement in premarket trading. Chevron's stock rose by 1.1%, while Canadian Natural's shares increased by 2.81%. This reflects investor optimism regarding the strategic benefits of the deal.

Future Outlook

The transaction is set to close in the fourth quarter of 2024, pending regulatory approvals. Canadian Natural Resources plans to allocate 60% of post-acquisition free cash flow to shareholders and 40% to debt reduction until its net debt reaches $15 billion. Additionally, the company announced a 7% increase in its quarterly dividend, further enhancing its appeal to investors.

As Chevron continues to navigate the complexities of the energy market, this sale marks a significant step in its efforts to adapt to changing industry dynamics and focus on more sustainable and profitable operations. The ongoing consolidation in the Canadian oil sands sector indicates a shift towards local control, as major international players divest their interests in favor of Canadian firms.

Sources

• Chevron Sells $6.5B Assets To Canadian Natural Resources: Details, Yahoo Finance.
• Chevron to sell assets for $6.5 billion to Canadian Natural Resources, Yahoo Finance.
• Chevron Sells Canada Oil Sand, Shale Assets for $6.5 Billion, Yahoo Finance.
• Chevron agrees to sell assets to Canadian Natural Resources for $6.5bn, Yahoo Finance.
• CNRL’s $6.5 Billion Chevron Deal Extends Oil Sands Buying Spree, Yahoo Finance.