Last week’s massive acquisition of Shell’s oil sands assets by Canadian Natural Resources Limited was purchased at comparable metrics to other oil sands deals according to the BOE Report M&A database.
CNRL paid Shell $11 billion for approximately 188,000 Bbl/d production for deal metrics of $59,000/BOE/d. Canadian Natural’s purchase of Murphy assets (13,800 barrels of production) skewed higher than the play’s average because in addition to buying production, CNRL also bought an interest in the Scottford Refinery. The valuation of the deal between CNRL and Murphy equated to roughly $120,000/BOE/d.
Relative to other western Canadian oil plays, Alberta’s oil sands currently fetch valuations at about the median. Perhaps not fetching valuation’s as high as the Montney formation because of (among other factors) the high cost per barrel to produce. Yet the oil sands still are able to maintain a higher average valuations than other formations which pose greater risk. As many will say, oil sands production is more akin to a stable, long-life manufacturing operation rather than a high netback (and decline) formation.
“Shell’s two agreements with Canadian Natural Resources (CNRL) and Marathon Oil underlines just how serious it is about re-shaping its portfolio around fewer, more advantaged geographies and resource themes,” commented Tom Ellacott, senior vice president of corporate analysis research at Wood Mackenzie. “The nearly US$15 billion of upstream M&A transactions on March 9th [which also includes a couple deals in the United States] were driven by oil and gas companies moving lower down the oil cost curve and leveraging core competencies.”