02:50 PM EDT, 10/07/2024 (MT Newswires) -- S&P Global Ratings on Monday said that its ratings on Canadian Natural Resources Ltd. ( CNQ ) , including its 'BBB-' issuer credit and unsecured debt ratings, are unchanged after the company earlier in the day made a US$6.5 billion acquisition move.

CNQ before trade announced the US$6.5 billion (C$8.775 billion) all-cash acquisition of Alberta assets from Chevron Corp. that S&P noted will "boost its interest" in the Athabasca Oil Sands Project (AOSP) and "provide a foothold" in the liquids-rich gas focused Duvernay, while increasing near-term leverage.

Through the transaction, S&P noted, CNQ will increase its position in AOSP by 20 percentage points to 90% (from 70%), adding 62,500 barrels per day (bbls/d) of long-lived synthetic crude oil (SCO) production, as well as acquire an interest in non-producing oil sands leases at Pierre River Mine, Ells River, Namur, and Seleski. The company will also acquire Chevron's 70% interest and operatorship of the Duvernay joint venture, adding 179 million cubic feet per day (mmcf/d) of natural gas and about 30,000 bbls/d of natural gas liquids (NGLs) production. On a combined basis, S&P noted, the acquired assets will add 122,500 boe/d gross (about 84,000 boe/d net of royalties), or about 9% to CNQ's second quarter 2024 volumes. The properties will also add a combined 1.28 billion barrels of oil equivalent (boe) of proved reserves, or about 9% to the company's year-end 2023 proved reserve base. CNQ expects to achieve cost synergies in both areas.

S&P noted CNQ will finance the C$8.775 billion acquisition through a combination of cash on hand (C$915 million as of June 30, 2024), drawing down on its credit facilities (C$5.45 billion available as of June 30, 2024) and proceeds from a C$4.0 billion term loan. The ratings agency expects the company to put more permanent financing in place over the next few months.

In conjunction with the acquisition and expected incremental cash flow, S&P noted the company has raised its long-term net debt target to C$12 billion from C$10 billion . It also noted the company intends to adjust its shareholder distribution policy until it reaches this new target level: It will allocate 60% of free cash flow to shareholders and 40% to the balance sheet until net debt reaches C$15 billion, 75% to shareholders/25% to the balance sheet until net debt reaches C$12 billion, and 100% to shareholders when net debt is at or below C$12 billion.

The company, S&P noted, also announced a 7% increase to its quarterly base dividend.

S&P said: "We believe the incremental cash flow from the acquired assets and revised financial policy will support the company's credit measures. Therefore, while we anticipate funds from operations (FFO) to debt will weaken somewhat below our prior expectations over the next two years, it will remain above 30% even under our mid-cycle price assumptions of US$50/bbl West Texas Intermediate."

CNQ was at last look up more than 2% at near $49.50 on the TSX.

Price: 49.61, Change: +1.39, Percent Change: +2.88