Chevron (CVX, Financial) has agreed to sell its stakes in Canadian oil sands and shale assets to Canadian Natural Resources (CNQ) for $6.5 billion. This transaction includes a 20% interest in the Athabasca oil sands project and a 70% share in the Duvernay shale project in Alberta.
The all-cash deal, effective from September 1, is expected to close in the fourth quarter, subject to regulatory approvals. Chevron is refocusing its growth strategy on other regions, particularly the Permian Basin in the United States and the Tengiz oil field in Kazakhstan, where a $48.5 billion expansion project is nearing completion.
Chevron is also acquiring Hess (HES) for $53 billion, gaining a stake in a significant offshore oil field in Guyana, a global exploration hotspot. This sale makes Chevron the latest major oil producer to exit the Canadian oil sands business, following companies like BP (BP), Shell (SHEL), ConocoPhillips (COP), Equinor (EQNR), and Devon Energy (DVN).
Control of these oil sands is increasingly concentrated in Canadian companies such as Canadian Natural Resources, Cenovus Energy (CVE), and Suncor Energy (SU). Oil sands are considered highly carbon-intensive, requiring significant extraction efforts, making them one of the highest emitters of carbon globally.
The Canadian oil sands industry is undergoing significant changes, largely due to the completion of the Trans Mountain Pipeline expansion. This pipeline has opened up Asian markets for Canadian crude oil, which previously relied heavily on US pipelines and refineries, resulting in larger price discounts and vulnerability to price shocks. From June to mid-September, the expansion facilitated an additional transport of 28 million barrels of oil to the West Coast, with nearly two-thirds destined for China, India, South Korea, and Brunei.
The Duvernay shale formation in southwestern Alberta is rich in condensate, light oil, and natural gas, with Chevron being one of the area’s largest drillers. Canadian Natural Resources expects average daily production from the asset to reach around 60,000 barrels of oil by 2025, with daily natural gas production at about 179 million cubic feet and liquefied natural gas at 30,000 barrels.
This acquisition is financed through a $4 billion term loan provided by Scotiabank and Royal Bank of Canada. Canadian Natural Resources also announced a 7% increase in its quarterly dividend.
