Oilsands deal latest sign cheap crude driving away international majors
Royal Dutch Shell’s deal to sell off most of its Canadian oilsands holdings shows the waning appeal of the higher-cost sector for foreign investors at a time of soft crude prices and abundant global supply.
The megadeal announced on Thursday has Netherlands-based Shell and Houston-based Marathon Oil both making big divestments of their Alberta oilsands assets. Canadian Natural Resources is spending $12.74 billion in cash and shares to snap them up, a price it says is still less than replacement cost.
Shell said it would focus on plays like deepwater oil and gas that offer higher returns on capital, while Marathon said it would spend US$1.1 billion to buy U.S. shale assets.
The transaction shows that the oilsands just can’t compete for those investments at current oil prices, said Martin Pelletier, portfolio manager at TriVest Wealth Counsel.