Canadian Natural Resources Limited (CNRL) announced Monday that it has entered into an agreement to acquire Chevron Canada Limited’s 20% stake in the Athabasca Oil Sands Project (AOSP), along with its interests in the Muskeg River and Jackpine mines, the Scotford Upgrader, and the Quest Carbon Capture and Storage facility. The acquisition, valued at US$6.5 billion, will boost CNRL's ownership in AOSP to 90%, increasing its Synthetic Crude Oil (SCO) production by 62,500 barrels per day.In addition to the oil sands acquisition, CNRL is also acquiring Chevron’s 70% working interest in the Duvernay light crude oil and liquids-rich assets in Alberta. This acquisition adds approximately 60,000 barrels of oil equivalent per day (BOE/d) in production, including 179 million cubic feet per day of natural gas and 30,000 barrels per day of liquids."These assets are a great fit for Canadian Natural and will allow us to further implement our strong operating culture and drive significant value for shareholders," said Scott Stauth, President of Canadian Natural.The deals are expected to close by the end of 2024, pending regulatory approval, with an effective date of September 1. The acquisition includes significant undeveloped oil sands leases, totaling 267,000 gross acres.In response to these acquisitions, Canadian Natural also announced a 7% increase in its quarterly dividend, raising it to $0.5625 per share starting in January 2025. This marks the company’s 25th consecutive year of dividend growth, with a compound annual growth rate of 21% over that period.CFO Mark Stainthorpe noted that the acquisitions would be immediately accretive to earnings and cash flow, contributing to long-term shareholder value. "These transactions are immediately cash flow positive, and with our strong balance sheet, we are well-positioned to take advantage of opportunities like this," he said.To finance the acquisition, CNRL has secured a $4 billion term loan facility from The Bank of Nova Scotia and Royal Bank of Canada, along with existing cash reserves. The company plans to adjust its free cash flow allocation policy to benefit shareholders while maintaining financial strength.As a result of increased free cash flow from the acquisitions, Canadian Natural's board has agreed to allocate 60% of free cash flow to shareholder returns until net debt falls to $15 billion. Once net debt is between $12 billion and $15 billion, 75% of free cash flow will be directed to shareholders, with the remaining 25% going towards the balance sheet. If net debt falls below $12 billion, 100% of free cash flow will be returned to shareholders.With these changes, CNRL is targeting to deliver returns comparable to its current policy of distributing 100% of free cash flow to shareholders, while strengthening its balance sheet.The acquisitions are expected to add approximately 122,500 BOE/d to CNRL’s 2025 production and increase its reserves by 1,448 million barrels of oil equivalent (MMBOE). The company anticipates further efficiencies and improved performance at AOSP, where it has already made substantial progress since its initial 2017 acquisition.The transaction represents a strategic move for CNRL, positioning the company for continued growth in the oil sands and Duvernay plays while delivering significant returns to shareholders.
