Canadian Natural Resources Limited (TSX: CNQ, NYSE: CNQ) and Shell Canada, an affiliate of Shell plc (NYSE: SHEL), have agreed to an asset swap transaction that will see CNQ take full ownership of the Athabasca Oil Sands Project (AOSP) mines, the companies announced Friday.
The deal, expected to close by the first quarter of 2025, will boost CNQ’s oil sands production by 31,000 barrels per day (bbl/d) and increase its control over a key part of its operations, strengthening its long-term output capacity.
CNQ gains full control of AOSP
Under the agreement, CNQ will trade 10% of its working interest in the Scotford Upgrader and Quest Carbon Capture and Storage facilities in exchange for Shell’s 10% stake in the AOSP mines and other non-producing oil sands leases.
Once finalized, CNQ will own 100% of the AOSP mines while retaining an 80% stake in the Scotford Upgrader and Quest facilities. The transaction does not involve any cash payment, apart from standard closing adjustments.
“This swap strengthens our ability to optimize long-term production while maintaining flexibility in our upgrading and carbon capture operations,” said Tim McKay, president of Canadian Natural Resources, in a statement.
Strategic benefits for CNQ
CNQ, known for its long-life, low-decline assets, expects the deal to enhance its diversified sales strategy.
The additional oil sands production will help the company meet its commitment of 169,000 bbl/d on the Trans Mountain Expansion pipeline and 87,500 bbl/d to the U.S. Gulf Coast, opening more access to global markets.
“This is a highly strategic move for CNQ,” said Phil Skolnick, energy analyst at Eight Capital, in a client note. “The company secures full control of a key asset while ensuring it retains a dominant position in upgrading and emissions-reduction infrastructure.”
Market reaction and analyst outlook
Shares of CNQ (TSX: CNQ) rose 1.4% to C$94.75 following the announcement, while Shell (NYSE: SHEL) edged up 0.6% to $56.90.
Analysts see the deal as a long-term positive for CNQ, with several firms revising their outlook. Scotiabank reiterated its outperform rating on the stock, citing the increased production flexibility.
RBC Capital Markets maintained a sector perform rating but noted that investors will look for revised 2025 production guidance once the deal closes.
More details are expected as regulatory approvals progress ahead of the early 2025 closing timeline.