11:30 AM EDT, 10/07/2024 (MT Newswires) -- Tudor, Pickering, Holt on Monday reiterated its buy rating on the shares of Canadian Natural Resources ( CNQ ) with a C$58.00 price target after the country's No.1 oil producer agreed to acquire Chevron's ( CVX ) 20% stake in the Athabasca oil sands project (AOSP), producing assets in Alberta's Duvernay shale field for US$6.5 billion and raised its dividend.

"CNQ to acquire CVX's 20% interest in AOSP for $6.5B in cash, bringing CNQ's total current working interest in the project to 90%, and adding 62.5mbopd of SCO production," analyst Jeoffrey Lambujon. In addition to the project including 20% of the Muskeg River and Jackpine mines, the Scotford Upgrader, and the Quest CCS facility, this portion of the agreement also includes various working interests in ~100k net acres of non-producing oil sands leases. Further, CNQ is to also acquire CVX's 70% operated WI% in Duvernay assets, from which production is targeted to average 60mboepd (179mmcf/d gas, 30mbopd liquids) in 2025. In total, the transaction is to add ~122.5mboepd and 1,448mmboepd of 2P reserves. Big picture, this deal may come as a slightly negative surprise at least on timing, mainly given commentary just recently from the Aug'24 conference call that messaged expectations for things to be quiet on the acquisition, and confidence in the asset base and not needing to transact; we'll look forward to the call for commentary around the potential benefits of overall cost improvement that could come from the package deal. Additionally, the pullback in the shareholder returns (% of FCF payout) may stand out, though the company notes that the pro-forma absolute shareholder payout at a normalized $70 WTI will match the pre-deal payout. For context, post-closing (expected Q4'24), the FCF allocation to shareholder returns will decrease from 100% (announced during Q1'24, with YE'23 earnings) to 60%, and with new guideposts for inflection points being (i) 75% at C$12-15B of ND (TPHe YE'25, at first blush, though the conference call at 8ET may provide more color) and (ii) 100% at