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Chevron to Sell Stake in Canada’s Duvernay Shale
02/06/2024
Chevron is selling its Canadian shale production operations as part of a wider plan to concentrate its investments on more profitable projects in the United States.
“Chevron is committed to safely delivering the affordable, reliable, ever-cleaner energy Canada and the world needs.“
Chevron Corp is selling its 70% stake in Alberta's Duvernay shale formation. The area, rich in unconventional hydrocarbons, extends over 245,000 net acres. The Duvernay assets have a production capacity of approximately 40,000 barrels of oil and gas daily. The estimated value of these assets is up to $900 million. Chevron first announced its intention to develop this area in 2017, following a three-year appraisal period. By the end of 2022, 243 wells in this field had been connected to production facilities.
Chevron's 2022 production in the area included 126 million cubic feet of natural gas and 17,500 barrels of condensate and natural gas liquids. Their extraction method involves horizontal drilling and hydraulic fracturing. Chevron believes this business holds substantial current value and growth potential, likely appealing to companies with similar portfolios.
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Kuwait Foreign Petroleum Exploration Co.'s subsidiary, KUFPEC Canada Inc., owns the remaining 30% stake.
“The Duvernay is looking like a hot spot for this year so it’s not surprising that M&A is happening. Murphy Oil Corp, which holds 4,000 boepd of Duvernay production and sold a portion of its assets there for C$150 million ($111.3 million) last year, will likely watch Chevron’s sale process closely. If Chevron gets a good price I’d not be surprised to see Murphy selling.”
- Phil Skolnick, an analyst at brokerage Eight Capital
Expectations
Chevron expects a stronger portfolio post-merger to boost these asset sales.
Chevron has announced plans to sell assets worth up to $15 billion before taxes by 2028. This strategy was revealed when Chevron agreed to merge with Hess Corp. in October, a deal involving a $60 billion all-stock transaction that includes debt. This follows Chevron's acquisitions of Noble Energy Inc. and PDC Energy Inc. in 2020 and 2023.
The Hess acquisition is set to be finalized in June 2024. Chevron plans to allocate two-thirds of its 2024 upstream capital budget, approximately $14 billion, to its U.S. operations. This includes about $6.5 billion for tight assets, with $5 billion dedicated to the Permian Basin.
Additionally, Chevron has earmarked $1.5 billion for downstream capital expenditure.
“We’re maintaining capital discipline in both traditional and new energies.”
- Chief executive Mike Wirth of Chevron
In 2021, Shell PLC, a British company and Chevron's competitor, sold its Duvernay light oil position to Crescent Point Energy Corp., based in Calgary, Alberta. The sale to Crescent Point involved assets producing 30,000 barrels of oil equivalent per day and encompassed 450,000 net acres, with the deal valued at $707 million.
The Duvernay play is among Canada's leading shale regions. Other notable companies with substantial stakes in the area include Crescent Point and PetroChina's Canadian division. Recently, Athabasca Oil and Cenovus Energy entered into a joint venture to boost their operations in the play.
The field has experienced a significant increase in licensing activity and enhancements in productivity. The cost of drilling a well has reduced substantially, from as high as CAD 20 million ($14.85 million) per well a decade ago to between CAD$10 million and CAD$15 million currently.
About Chevron Corporation
Chevron Corporation, a global energy leader, reported a decrease in earnings in the third quarter of 2023, with $6.5 billion compared to $11.2 billion in the same period of 2022. Despite this, they returned a record $20 billion to shareholders, 27% higher than the previous year. The company is shifting its focus, evident in strategic acquisitions like PDC Energy, Inc., and a majority stake in ACES Delta, LLC, the largest green hydrogen production and storage hub in the U.S.
Chevron is refocusing its upstream investments, allocating over 75% of its capital to strategic areas such as U.S. shale basins, the Gulf of Mexico, the Eastern Mediterranean, Guyana, Australia, and Kazakhstan.
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