In a major move to refocus its energy portfolio, Chevron has agreed to sell its stakes in the Athabasca Oil Sands and Duvernay Shale projects to Canadian Natural Resources for a whopping $6.5 billion. The deal, expected to close by the end of the year, marks a significant step in Chevron’s strategy to shed between $10 billion and $15 billion in assets by 2028.
The assets, situated in Alberta, Canada, have been contributing a substantial 84,000 barrels of oil equivalent per day to Chevron’s production. The Duvernay Shale, in particular, is considered one of Canada’s most promising shale plays, having attracted investments worth $2.9 billion over the past three years.
Once the deal is finalized, Canadian Natural will hold a 90% stake in the Athabasca Oil Sands project, with Shell retaining the remaining 10%. The acquisition is expected to boost Canadian Natural’s production targets by 122,500 barrels of oil equivalent per day by 2025.
In addition to the asset sale, Canadian Natural has announced a 7% increase in its quarterly dividend to 56.25 Canadian cents per share, payable in January 2025. The company’s finance chief, Mark Stainthorpe, expressed confidence that the deal would generate immediate cash flow and earnings benefits.
Chevron, meanwhile, is shifting its focus towards more lucrative opportunities, with plans to allocate over 75% of its production budget to U.S. shale basins, the Gulf of Mexico, the Eastern Mediterranean, Guyana, Australia, and Kazakhstan. The company recently cleared a regulatory hurdle for its $53 billion acquisition of Hess, but still faces a challenge from Exxon and CNOOC, Hess’s partners in a Guyana joint venture. A three-judge arbitration panel is scheduled to hear the case in May 2024.
Analysts at RBC Capital Markets view the deal as a positive step towards streamlining Chevron’s portfolio ahead of the pending Hess acquisition, predicting improved free cash flow into 2025. Chevron’s shares rose 1.1% in early trading, buoyed by a favorable oil price environment.
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