Canadian Natural Resources (TSX: CNQ) is significantly enhancing its production profile in Alberta, announcing a transaction this morning with Chevron Canada to acquire their 20% interest in the Athabasca Oil Sands Project, as well as their 70% working interest of light crude oil and liquid rich assets in the Duvernay play.
The transaction, which will see Canadian Natural Resources pay US$6.5 billion in cash, is expected to add 122,500 barrels of equivalent per day to their production profile, as well as 1,448 MMBOE of total proved plus probable reserves. For context, at the end of the second quarter, the company had a production profile of 1.29 million barrels of oil equivalent per day.
The transaction will bring the working interest in the Athabasca Oil Sands Project to 90% for Canadian Natural Resources, while adding 62,5000 bbl/d of long life no decline synthetic crude oil production. The purchase of the 20% interest is also to include equivalent interests in the Muskeg River and Jackpine mines, the Scotford Upgrade, and the Quest Carbon Capture Storage facility, along with 267,000 gross and 100,000 net acres.
The Duvernay purchase meanwhile is expected to add 60,000 BOE/d to the production profile of the company, comprised of 179 MMcf/d of natural gas and 30,000 bbl/d of liquids.
Both asset packages are expected to add free cash flow to the company, with the purchase leading to the company increasing its dividend by 7% to $0.5625 per share per quarter. On a go-forward basis, 60% of free cash flow will be allocated to shareholders, while 40% is to be allocated to the balance sheet until net debt reaches $15 billion. That ratio will shift to 75%/25% when net debt is between $12 and $15 billion, while 100% of free cash flow is expected to handed over to shareholders when net debt is at or below $12 billion.
The changes in free cash flow attribution are said to be equivalent to what shareholders were receiving prior to the major acquisition.
The transaction is set to be financed by a fully committed $4 billion term loan facility, with the remainder to be funded with existing cash.
Canadian Natural Resources last traded at $48.22 on the TSX.
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