Shell Canada Ltd. will swap its 10% interest in the Athabasca Oil Sands Project (AOSP) to Canadian Natural Resources Ltd. (CNQ) in exchange for a 10% interest in the Scotford Upgrader and Quest Carbon Capture and Storage facilities.

Following the deal, CNQ will own 100% interest in the oil sands mines and will add 31,000 bbl/d of production. CNQ will retain an 80% working interest in the CCS projects. The deal doesn’t include an exchange of cash. Closing is expected by the end of first-quarter 2025, subject to regulatory approvals.

TPH&Co. analyst Jeoffrey Lambujon said the deal benefits both CNQ and Shell.

“For CNQ, the pro-forma full ownership [in the oil sands project] will allow the company to further push optimization at the mine both on increased production and cost reductions over time,” Lambujon wrote in a Jan. 30 report. For Shell, “the Quest working [interest] further boosts its carbon capture asset base”

CNQ said the company’s budgeted production guidance for 2025 will be revised upon closing of the transaction.

“On capex, we’d anticipate a rotation from the previous Scotford upgrader allocation into AOSP with a minimal (if any) impact to the capital program or 2025,” Lambujon said. “Big picture, while this screens TPHe neutral to our FCF/EV (the added volumes will receive a lower cost bitumen netback, realizing benchmark WCS prices instead of the premium we would have otherwise seen vs. SCO), we view this as positive for both counterparties.”

The transaction enhances CNQ’s diversified sales strategy for its crude oil production, including its long-term commitment of 169,000 bbl/d on the Trans Mountain Expansion pipeline and 87,500 bbl/d to the U.S. Gulf Coast that provides optionality and access to global markets, the company said in a Jan. 29 press release.

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