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Chevron to begin marketing shale gas assets in Canada's Duvernay

Published 2024-01-19, 11:55 a/m
© Reuters. FILE PHOTO: The Chevron logo is pictured after the U.S. government granted a six-month license allowing Chevron to boost oil output in U.S.-sanctioned Venezuela, in Caracas, Venezuela, December 2, 2022. REUTERS/Gaby Oraa/File Photo
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By Nia Williams and Sabrina Valle

HOUSTON (Reuters) -Chevron on Friday said it will put its natural gas business in Canada's Duvernay Shale for sale as it continues to streamline global operations following several big acquisitions.

The assets, which produce about 40,000 barrels of oil and gas a day from about 235,000 acres (951.01 square kilometers) in the Duvernay field in central Alberta, could fetch up to $900 million, according to the Houston-based advisory firm Energy Advisors Group.

Chevron (NYSE:CVX) has said it plans to offer between $10 billion and $15 billion in assets by 2028 following deals with Hess Corp (NYSE:HES), PDC Energy and Noble Energy (NASDAQ:NBL) that will significantly expand its oil and gas output.

"We have a strong position and are proud of our performance in the Duvernay," a spokesperson told Reuters. "The business holds significant value in both its current production as well as potential growth opportunities, which we expect to be attractive to other companies with complementary portfolios."

The company's other Canadian operations are unaffected, the spokesperson said.

Following the Hess deal announcement, Chevron stated that it planned to focus more than 75% of its upstream capital expenditures on U.S. shale basins, the Gulf of Mexico, the Eastern Mediterranean, Guyana, Australia and Kazakhstan.

The company said it would also put high return assets for sale to diversify its portfolio across asset types and geographies and to achieve high cash margins and low carbon intensity production.

The Hess deal is pending regulatory approvals and is expected to close in the second half of the year.

Brian Lidsky, director of Energy Advisors Group, estimated the properties could be worth $900 million based on recent acquisitions of Duvernay properties by Crescent Point (TSX:CPG) and others.

Chevron first announced plans to develop the East Kaybob region of the Duvernay play in Alberta in 2017 after three years appraising the area. At the end of 2022, 243 wells in the field had been tied into production facilities.

In 2021, Chevron shelved plans to build a major liquefied natural gas project exporting up to 10 million tonnes per year from Kitimat on Canada's west coast.

The Duvernay is one of Canada's top shale plays. Other companies with significant positions in the region include Crescent Point and PetroChina's Canadian unit. Last month, Athabasca Oil (TSX:ATH) and Cenovus Energy (TSX:CVE) formed a joint venture to accelerate their activity in the play.

The field has seen a surge in licensing activity and productivity improvements, with costs coming down from as high as C$20 million ($14.85 million) per well a decade ago to C$10 million-C$15 million today, analysts at brokerage Eight Capital said.

"The Duvernay is starting to become a key focus for the industry, and is thus likely to get investors’ attention in 2024," its analysts wrote in a research note this month.

© Reuters. FILE PHOTO: The Chevron logo is pictured after the U.S. government granted a six-month license allowing Chevron to boost oil output in U.S.-sanctioned Venezuela, in Caracas, Venezuela, December 2, 2022. REUTERS/Gaby Oraa/File Photo

"Operators have done enough drilling to understand how to optimize the technology."

($1 = 1.3467 Canadian dollars)

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