(WoodMac, 7.Oct.2024) — Addressing Chevron’s announcement to sell Canadian assets to Canadian Natural Resources (CNRL) for US$6.5bn Mark Oberstoetter, Wood Mackenzie Upstream Research Director in Calgary, said “Chevron has shown commitment to its divestment target with two sale announcements in two weeks. Offloading Alaska assets to ConocoPhillips (COP) last week for US$300mn was a small step and made strategic sense given their lack of materiality in the Supermajor’s portfolio. Today’s announcement moves the company much closer to its US$10-$15bn divestment target.”
Continued Oberstoetter, “this deal was a surprise for the inclusion of both the Athabasca Oil Sands Project mining interest alongside Kaybob Duvernay. The Duvernay assets were being marketed on a singular asset deal since January 2024. The combined deal for the integrated oil sands mining position and Duvernay points to Chevron seeking out a cash deal and there being few well-funded buyers for the standalone Duvernay package.”
Chevron retains its offshore Canada stakes for now.
“CNRL will now have spent US$33bn across 23 deals in the past twenty years,” Ayisha Zia, Senior Analyst on the Corporate team. “The acquisition streaks, coupled with organic production growth and debottlenecking expansions in assets like Horizon Mine, are what has made the company Canada’s top oil and gas producer,” Zia said
According to Wood Mackenzie’s Lens Upstream, CNRL will now move into the top 25 rankings of global oil and gas producers and is the third largest non-Major or National Oil Company, behind only ConocoPhillips and Occidental Petroleum.
Ayisha added that “this deal is a noteworthy pivot from Canadian Large Caps’ recent focus on shareholder returns.”
While CNRL also increased its dividend with this deal announcement, US$4bn of debt will be added to finance the transaction. By the end of 2024, pro forma exit gearing is expected to rise from 19% (as of 1H 2024) to approximately 30%.
Under Wood Mackenzie’s base case projection, CNRL’s net debt is anticipated to swiftly decline below Cdn$15bn by the end of 2025, with free cash flow shareholder pay-out increasing to 75% in 2025 and returning to 100% by 2027. Reversion to 100% free cash flow return to shareholders could be earlier with potential operating cost reduction and cost synergies.
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