Chevron seen as next to make exit from oilsands
Move would continue recent exodus of international producers from Alberta
CALGARY Analysts believe it’s only a matter time before Chevron Corp. becomes the latest international player to exit the oilsands as its Canadian rivals double-down on the basin.
Reuters reported Thursday, citing anonymous sources, that California-based Chevron was mulling the sale of its 20 per cent stake in the 225,000-barrels-per-day Athabasca Oil Sands Project (AOSP), located north of Fort McMurray, Alta., valued at $2.5 billion.
Chevron Canada spokesperson Leif Sollid would not comment on a possible sale, but said in an email the project continues to generate cash or strong “financial performance.” Rumours of a possible sale have been circulating through Calgary’s corporate towers for months following several other major divestments.
“Eventually they will sell, because having a small position in the oilsands — one with no growth, really — doesn’t make a lot of sense in the longer term,” said Anish Kapadia, a London-based analyst with Tudor, Pickering, Holt & Co.
The 20 per cent stake in AOSP represents a strategic opportunity for Canadian oilsands rivals who have been beefing up their operations.
In March, Royal Dutch Shell PLC and Marathon Oil Corp. sold their stakes in the AOSP, which includes mining operations and an upgrader, to Calgary-based Canadian Natural Resources Ltd. for $12.7 billion. Like Chevron, Marathon also owned a 20 per cent stake in the AOSP and agreed to sell it for $2.5 billion, which provides a direct price comparison to Chevron’s stake.
One analyst, who declined to be identified, said eventual AOSP operator Canadian Natural may be a likely buyer, given the synergies. Canadian Natural’s existing stake in AOSP will allow the company to integrate it with the Horizon oilsands mine, which will in turn provide more options in terms of where its bitumen is ultimately refined.
The possible Chevron exit would add to the steady procession of oil majors walking away from the oilsands. Apart from the Shell divestment, ConocoPhillips Co. also announced in March it would sell its stake in its oilsands project along with natural gas assets to jointventure partner, Cenovus Energy Inc. for $17.7 billion. Total SA and Statoil SA have also been cutting their oilsands exposure over the past few years.
Chevron, like other major companies, has focused its capital spending around shorter-cycle shale projects recently, and analysts say the company is likely to dispose of its oilsands position as it realigns its global portfolio.
“Does Canada fit into Chevron’s core? Not really,” Edward Jones senior energy analyst Brian Youngberg said. He added that Chevron previously admitted it had “stretched itself too thin” between its massive liquefied natural gas projects, shale assets and overseas projects. Energy producers across the industry are increasingly focusing on fewer geographic areas and, for Chevron, those areas are its LNG export facilities and the Permian shale basin.
Concerns over carbon taxes, environmental opposition, costs and the fact that it owned a nonoperating interest in the project would likely contribute to Chevron looking to sell its interests in the oilsands, Youngberg said.
“The oilsands are going to be mostly Canadian producers, and two or three others, because you need scale,” he said, noting that the oilsands are a high-cost formation and scale is necessary to bring down costs.
Suncor, Canadian Natural and Cenovus have all cited size and scale as part of the rationale for their multibillion-dollar deals in the oilsands as that would allow the companies to drive down their per-barrel costs during a time of weak oil prices.