7 interesting things about CNRL’s $3.8B oilsands buy from Devon

Image: Joey Podlubny/JWN

Canada’s largest oil and gas producer continues to acquire new assets.

A $3.8-billion deal has been announced for Canadian Natural Resources Limited to purchase the oilsands and heavy oil assets of Oklahoma-based Devon Energy. It is expected to close in June.

Here are seven interesting things to know about the transaction and its players.

  1. Its the second biggest upstream oil and gas M&A event in North America so far in 2019, after Occidental Petroleum’s US$57-billion accepted agreement to acquire Anadarko Petroleum, according to Evaluate Energy M&A.
  2. Devon is the third international player in two years that Canadian Natural has enabled to exit Canada’s upstream oilsands industry.In 2017 the company spent $12.74 billion to acquire oilsands assets, primarily from Royal Dutch Shell but also from Houston-based Marathon Oil, allowing both companies to quit the play.
  3. At approximately 122,800 bbls/d currently, the inclusion of the Devon assets into Canadian Natural’s portfolio further solidifies it as Canada’s only oil and gas producer above 1 million boe/d. The company reached the milestone following its 2017 acquisition of the majority stake in the Athabasca Oil Sands Project. It averaged 1.035 million boe/d in Q1/2019. 
With the Devon properties, Canadian Natural expects to average approximately 1.198 million boe/d this year. (The transaction will be effective Jan. 1, 2019).
  4. Devon has a longer history in the oilsands than may be recognized. 
In 1997 the company purchased the Underground Test Facility from the Alberta Oil Sands Technology and Research Authority, a milestone collaboration between industry and government where researchers had already proven the viability of the SAGD concept. In 2002 Devon filed its first regulatory application for the Jackfish project, and the first 35,000-bbl/d phase started operating in 2007.
  5. In addition to the Jackfish SAGD complex and cold heavy oil, the deal also includes the proposed Pike SAGD project, which Devon owns in a 50/50 partnership with BP. 
Pike has regulatory approval for 78,500 bbls/d, but work on the project has been on hold. 
In December 2018 Devon filed the regulatory application for an expansion, Pike 2, which would be developed in a single phase of 70,000 bbls/d. The company indicated it would not start operating before 2025.
  6. Canadian Natural said it sees “significant synergies” to combine Pike into Jackfish, and there is also possible optimization with facilities at its existing Kirby SAGD projects to reduce capital costs. Canadian Natural’s Kirby South project currently produces about 38,000 bbls/d. In early May the company initiated steam injection at the 40,000-bbl/d Kirby North expansion, and expects to start production this summer.
  7. Canadian Natural’s new purchase could be seen as finishing what it started five years ago. In 2014, the company spent $3.13 billion to acquire Devon’s conventional oil and gas assets in Canada. 
Like the heavy oil and oilsands properties, the conventional operations were located nearby Canadian Natural’s existing assets. The package was comprised of liquids-rich natural gas and light oil production totalling approximately 87,000 boe/d.

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