Kuwait Petroleum and Chevron strike shale deal

Oct 07, 2014 12:00 AM

Chevron will sell a 30% stake in a venture to develop oil and natural gas from Canada’s Duvernay shale to Kuwait Petroleum Corp., Bloomberg has reported.

The deal has been seen as a venture by Kuwait Foreign Petroleum Exploration, a unit of state-run Kuwait Petroleum, to gain a foothold in the North American shale play. Kuwait mainly relies on traditional drilling but has been looking to explore unconventional means in recent years.

Last year chairman and managing director Sami al-Rushaid said the Kuwait Oil Co. has identified a shale gas deposit and was planning to develop the resource soon.

Chevron said the $1.5bn purchase price includes cash and an agreement to contribute to the venture’s capital costs. The company said in a statement last week it has drilled 16 exploration wells in the area so far.

The Duvernay, in central Alberta, holds an estimated 443 trillion ft3 of gas and 61.7bn barrels of oil, according to a report last year by the Energy Resources Conservation Board.

Chevron’s deal with Kuwait appears to “be at a good price,” said Peter Hutton, a London-based analyst for RBC Capital Markets who rates Chevron a hold and owns none. The sale will reduce Chevron’s cash burn as it invests heavily in new developments through 2017, Hutton said in a note to clients.

RBC assumes Chevron will sell $4bn of assets this year, reducing cash burn to $7.2bn. Chevron will keep a 70% share in the venture and remain the operator. “We remain encouraged by the early results of our exploration program,” Jeff Shellebarger, president of Chevron’s North American unit, said in the statement.

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