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CNR snaps up Devon's Canada assets in US$2.8 billion deal

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Oilfield Technology,

Canadian Natural Resources has announced a CAN$3.8 billion (US$2.8 billion) acquisition of Devon Energy's Canadian assets, marking the company's seventh major acquisition since 2014.

Taking into account the subsequent corporate effects of the deal, Wood Mackenzie has valued the assets at US$3.7 billion.

The assets include the 108 000 bpd Jackfish oilsands project, which comprises about 88% of the valuation. The remainder includes primary heavy oil production of 20 000 bpd in Alberta, the undeveloped Pike oil sands lease, and Devon Energy's Horn River and Liard positions.

Stephen Kallir, senior analyst at Wood Mackenzie, said: "Our valuation of the deal increases substantially once the corporate effects are accounted for. The estimated long-term Brent oil price of US$58.12/bbl implies an attractive price for Canadian Natural Resources."

"Another metric that proves the attractive valuation is consideration per flowing barrel. CAN$29 425/bbl (US$21 824/bbl) for this deal is well below other heavy oil and oilsands deals done in the past five years."

Devon Energy previously telegraphed its exit process on 19 February, to focus on its US assets. Canadian Natural Resources was amongst the short list of potential buyers.

The company acquired Devon Energy's Canadian conventional assets in 2014 for CAN$3.1 billion (US$2.8 billion) and added other gas-weighted conventional properties from Apache and EOG that same year.

Kallir said: "Since 2014, the focus has been heavy oil. The March 2017 US$9.8 billion acquisition into the Athabasca Oil Sands Project from Shell and Marathon, as well as the September 2017 US$786 million buy of Cenvovus' Pelican Lake asset, has proved the company's commitment to the Canadian heavy oil theme."

"Canadian Natural Resources is Canada's largest producer, which has come from a mix of organic growth and opportunistic acquisitions. Pro forma production will be 1.198 billion boe/d. In context, this is slightly less than all of India, and more than Colombia.

"The company is also the 25th largest producer in the world. When you remove national oil corporations, it is the eighth largest, behind only the Majors and ConocoPhillips. In comparison, Devon will drop from 49th to 56th.

"This continues the trend of Canadian-domiciled consolidation that we've seen since 2016. In 2020, the oil sands will produce 3.3 million bpd and just four companies now account for 85% of that volume. Those companies operate an even larger share – close to 95%."

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