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Over the past few years, there has been plenty of deal-making in the oil and gas industry and that trend is continuing today after Chevron (CVX) announced that its selling ownership stakes in two shale assets in Western Canada to Canadian Natural Resources (CNQ) for $6.5 bln in cash. More specifically, CVX is selling its 20% interest in the Athabasca Oil Sands project and its 70% interest in the Duvernay Shale, which had a combined production of 84,000 barrels of oil equivalent per day in 2023.

• CNQ is moving higher on this development (although, the strength in crude prices is also helping), reflecting the high-quality nature of the assets its acquiring. On that note, the company also raised its quarterly dividend by 7% in conjunction with the acquisition as it expects the new assets to increase its average production by about 60,000 barrels of oil per day in 2025.
• Given the strong production that these assets are generating, it may seem surprising that CVX is cutting the cord on them. However, when viewing the deal through the lens of the company's strategic move to focus on its Permian Basin and Guyana portfolio, it's in line with its big picture plan.
• That strategy took a huge step forward last October when CVX announced its intention to acquire Hess Corporation (HES) in an all-stock transaction valued at $53.0 bln. That deal, which the Federal Trade Commission approved on September 30, 2024 -- under the stipulation that HES CEO John Hess cannot serve on CVX's Board of Directors -- substantially expanded CVX's footprint in Guyana with the addition of the Stabroek block.
• CVX's new 30% ownership stake in Stabroek provides it with more than 11.0 billion barrels of oil equivalent discovered and recoverable resources. The acquisition is also expected to be accretive to cash flow in 2025, achieving run-rate cost synergies of about $1.0 bln.
• Meanwhile, CVX's Permian Basin assets are producing record production numbers, helping Q2 worldwide net oil-equivalent production to jump by 11%. With its Guyana and Permian Basis assets providing a formidable one-two punch, CVX is identifying $10-$15 bln in other assets to divest, and its ownership stakes in Athabasca and Duvernay fit the bill.

The main takeaway is that this deal looks like a win-win scenario for both CVX and CNQ. While CNQ gains two high-quality assets in Alberta, Canada, CVX is able to take another step forward in its mission of becoming a leading player in the Guyana and Permian Basin plays.