Canadian Natural Resources Limited Announces Swap Transaction

Rhea-AI Summary

Canadian Natural Resources (TSX: CNQ) (NYSE: CNQ) has announced a significant asset swap transaction with Shell Canada , stemming from a 2017 agreement. Canadian Natural will exchange 10% of its interest in the Scotford Upgrader and Quest Carbon Capture and Storage facilities for Shell's remaining 10% stake in the Athabasca Oil Sands Project (AOSP) mines.

Upon completion, Canadian Natural will own 100% of the AOSP mines, increasing its production by approximately 31,000 bbl/d, while retaining an 80% interest in the Scotford Upgrader and Quest facilities. The transaction involves no cash exchange except for regular closing adjustments and is expected to close by Q1/25, pending regulatory approvals.

The company's position is strengthened by its commitment of 169,000 bbl/d on the Trans Mountain Expansion pipeline and 87,500 bbl/d to the USGC. The transaction's impact will be reflected in an updated 2025 production guidance following closure.

Positive

• Production increase of 31,000 bbl/d through acquisition of remaining 10% AOSP mines stake
• Achievement of 100% ownership in AOSP mines
• No cash required for the transaction (except closing adjustments)
• Strategic alignment with existing pipeline commitments (169,000 bbl/d TMX, 87,500 bbl/d USGC)

Negative

• Reduction of stake in Scotford Upgrader and Quest Carbon Capture facilities from 90% to 80%

Insights

Energy Industry Analyst

This strategic asset swap marks a significant operational consolidation for Canadian Natural Resources, demonstrating the company's commitment to optimizing its oil sands portfolio. The acquisition of Shell's remaining 10% stake in AOSP mines, bringing ownership to 100%, will add 31,000 bbl/d of production capacity - a meaningful increase that enhances operational control and efficiency.

The transaction's structure is particularly noteworthy for three reasons: First, the absence of cash consideration (except for closing adjustments) preserves CNQ's robust balance sheet while expanding production capacity. Second, the deal simplifies operational complexity by consolidating mine ownership, potentially leading to improved cost synergies and streamlined decision-making. Third, the timing aligns perfectly with CNQ's transportation commitments, including 169,000 bbl/d on TMX and 87,500 bbl/d to USGC, enhancing market optionality for the increased production.

The reduction to 80% ownership in Scotford Upgrader and Quest facilities represents a calculated trade-off. While this might slightly reduce exposure to upgrading margins and carbon capture credits, the benefits of full mine ownership likely outweigh these considerations, especially given the mines' status as long-life, no-decline assets that generate substantial free cash flow.

The transaction's impact on CNQ's market position is substantial:

• Enhanced operational control over mining operations
• Improved ability to optimize production scheduling and maintenance timing
• Stronger positioning in Western Canadian heavy oil markets
• Greater flexibility in production allocation across various sales channels

The deal's structure and timing suggest a well-thought-out strategic move that strengthens CNQ's core competitive advantages while maintaining financial flexibility. The increased production, combined with secured pipeline capacity, positions CNQ favorably for capturing price premiums in multiple markets.

Calgary, Alberta--(Newsfile Corp. - January 29, 2025) - Canadian Natural Resources Limited (TSX: CNQ) (NYSE: CNQ) ("Canadian Natural" or the "Company") announces that pursuant to a 2017 agreement with Shell Canada Limited and affiliates ("Shell") and as a result of certain conditions being met, Canadian Natural and Shell are transacting an asset swap related to the Athabasca Oil Sands Project ("AOSP").

Effectively, Canadian Natural will swap 10% of its working interest in the Scotford Upgrader and Quest Carbon Capture and Storage ("Quest") facilities for Shell's remaining 10% working interest in the AOSP mines, associated reserves and additional various working interests in a number of other non-producing oil sands leases. As a result, and at close of the transaction, Canadian Natural will increase its working interest in the AOSP mines to 100%, subsequently increasing the Company's production by approximately 31,000 bbl/d and will own an 80% working interest in the Scotford Upgrader and Quest. The transaction does not include any exchange of cash, except for regular closing adjustments and is targeted to close by the end of Q1/25, subject to regulatory approvals.

One of Canadian Natural's advantages is the size and strength of our long life, no decline Oil Sands Mining and Upgrading assets combined with our top tier operating cost driven through effective and efficient operations that generates significant and sustainable free cash flow for decades. This transaction further enhances Canadian Natural's advantage which is supported by a diversified sales strategy for its crude oil production including its long-term commitment of 169,000 bbl/d on the Trans Mountain Expansion ("TMX") pipeline and 87,500 bbl/d to the USGC that provides optionality and access to global markets.

This transaction is not included in the Company's budgeted production guidance for 2025 issued on January 9, 2025 and as a result, 2025 production guidance will be revised upon closing of the transaction.

Canadian Natural is a senior crude oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and Offshore Africa.

	CANADIAN NATURAL RESOURCES LIMITED T (403) 517-6700    F (403) 517-7350     E ir@cnrl.com 2100, 855 - 2 Street S.W. Calgary, Alberta, T2P 4J8 www.cnrl.com
	SCOTT G. STAUTH President   MARK A. STAINTHORPE Chief Financial Officer   LANCE J. CASSON Manager, Investor Relations   Trading Symbol - CNQ Toronto Stock Exchange New York Stock Exchange

 

Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company does not undertake to update forward-looking statements except as required by applicable securities laws. Refer to our website for detailed forward-looking statements and notes regarding Non-GAAP and Other Financial Measures at www.cnrl.com.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/238899

FAQ

What are the terms of CNQ's asset swap with Shell announced on January 29, 2025?

CNQ will swap 10% of its interest in Scotford Upgrader and Quest facilities for Shell's remaining 10% stake in AOSP mines, resulting in CNQ owning 100% of AOSP mines and 80% of Scotford/Quest facilities.

How much will CNQ's production increase after the Shell asset swap?

The transaction will increase CNQ's production by approximately 31,000 bbl/d through the acquisition of Shell's remaining 10% stake in AOSP mines.

When is CNQ's asset swap with Shell expected to close?

The transaction is targeted to close by the end of Q1/25, subject to regulatory approvals.

What is CNQ's pipeline commitment on the Trans Mountain Expansion?

CNQ has a long-term commitment of 169,000 bbl/d on the Trans Mountain Expansion pipeline.

Will CNQ's 2025 production guidance change due to the Shell asset swap?

Yes, CNQ will revise its 2025 production guidance upon closing of the transaction, as this swap was not included in the guidance issued on January 9, 2025.