Canadian Natural Resources Ltd. is paying $6.5 billion to buy the balance of its Alberta oil sands from Chevron Corp., cementing its position as Canada’s biggest oil producer. The deal, announced late Friday, is the latest in a string of purchases by CNRL that consolidate the vast oil sands deposits in the province under local ownership.
CNRL has been lucky to capitalize on the divestitures by Devon Energy Corp. and Shell Plc, which have attempted to distance themselves from the more expensive and carbon-intensive oil sands business. Investors liked this strategy that has helped CNRL add more production volumes and improve its operating performance.
CNRL shares rose over 4% when the Chevron deal was announced, showing increased investor optimism. It further strengthened interest in the important oil sands mine and the related upgrading facility, added natural gas assets from the Duvernay formation, and, to CNRL President Scott Stauth, strengthens the portfolio of Canadian Natural. The deal brings CNRL’s equity position in the Athabasca oil sands project to 90% from 70%, where it acquired its first equity in the venture from Shell in 2017.
Eight Capital analyst Phil Skolnick said the acquisition of CNRL’s oil sands business was expected, but said Chevron’s sale boded well for CNRL as a natural buyer. The deal is expected to increase CNRL’s oil and gas output by around 9%, or an additional 122,500 barrels per day of oil.
CNRL increased its dividend 7% and also decided to take debt to buy the remaining part of it. Desjardins analyst Chris MacCulloch believes that such an approach might cause the investor to get worried because the move of the company to reduce the capital returns is just temporary. Still, MacCulloch admitted that still the overall positive effect of the deal for CNRL will be an asset consolidation effort.
Chevron’s decision to leave the oil sands business is the latest example in an emerging trend of U.S. and international oil producers distancing themselves from the sector. Big players like BP Plc and TotalEnergies SE are equally divesting themselves of the businesses. As a result, the operations of assets concerned are gradually taken over by companies based in Canada, like CNRL, Suncor Energy Inc., and Cenovus Energy Inc. Eric Nuttall, a partner at Ninepoint Partners says, with few obvious assets now remaining on the market, “It’s Canada’s time to shine,” suggesting foreign investment may again come into Canadian oil producers in the future.
