Canadian Natural Resources (CNQ) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Chevron's 20% interest in AOSP and 70% operated interest in Duvernay increases working interest in AOSP to 90% and adds significant liquids-rich production, enhancing scale, asset diversity, and operational control.

• Assets provide high-value, de-risked, liquid-rich production with Montney-like capital efficiencies and decades of zero-decline, high-value SCO production.

• Strategic fit leverages existing expertise, infrastructure, and synergies with adjacent assets, supporting long-term growth and sustainability.

• Duvernay assets complement core Deep Basin holdings and offer operational and cost synergies.

• Builds on operational strengths and efficiencies developed over years in oil sands mining.

Financial terms and conditions

• Purchase price is US$6.5 billion (CAD 8.775 billion at F/X = 1.35), effective September 1, 2024, with targeted close on December 6, 2024.

• Acquisition cost is $71,600 per BOE per day at targeted 2025 production, immediately accretive to flowing metrics.

• Funded by a fully committed $4 billion term loan facility, existing cash, and bank facilities; $6.2 billion liquidity as of September 30, 2024.

• Dividend increased by 7% to $0.5625 per share, effective January 2025, marking 25 consecutive years of increases.

• Debt metrics remain strong post-acquisition, with debt to book capital targeted at ~30% and debt to EBITDA at ~1.1x by end of 2024.

Synergies and expected cost savings

• Operational synergies expected between Horizon and AOSP mines, and cost synergies in Duvernay with adjacent assets.

• Identified cost efficiencies in Duvernay of approximately 15% or CAD 40 million per year through contractor, purchasing, and transportation savings.

• G&A and operating cost improvements expected in Duvernay.

• Duvernay assets offer over 340 net drilling locations and potential to grow production to 70,000 BOE/d by 2027, leveraging existing infrastructure.

• Continuous improvement initiatives aim to further reduce costs and optimize production.