A few months ago, Royal Dutch Shell (RDS.A) (RDS.B) sold off $7.25 billion of its oil sands assets to Canadian Natural Resources (CNQ -0.07%). Last week, ConocoPhillips (COP -0.46%) joined the ranks of big oil players that are selling their sands projects, with a deal nearly double that already massive number: $13.3 billion.

In this segment from Industry Focus: Energy, analysts Sean O'Reilly and Taylor Muckerman explain why these companies are selling off their sands projects, who they're selling them to, what both the buyers and the sellers are getting out of these deals, what this means for the oil industry at large, and more.

A full transcript follows the video.

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This video was recorded on March 30, 2017.

Sean O'Reilly: Shell Oil a couple months ago.

Taylor Muckerman: Yeah, Royal Dutch Shell.

O'Reilly: They sold off their oil-sands assets up there in the Canadian North.

Muckerman: Not every last barrel of exposure, but yeah, they sold off $7.25 billion worth.

O'Reilly: So, naturally, you're like, that's a lot of money.

Muckerman: Yeah, they sold it to Canadian Natural Resources.

O'Reilly: All of a sudden, ConocoPhillips announces this week --

Muckerman: A deal nearly double that at $13.3 billion, and that's also on the tails of Marathon Oil selling $2.5 billion --

O'Reilly: What did they pay for these assets?

Muckerman: That I haven't really taken a dive into.

O'Reilly: For an oil company, $1 billion is like...but this is a chunk of change for even these guys.

Muckerman: Sure, $13 billion is definitely a chunk of change. They had to cut their dividend recently, so they're trimming some debt, they're buying back shares, doubling their share buyback from $3 billion to $6 billion using some of this money. But they're not losing all of their exposure to the oil sands, because what equates to $2.7 billion of that $13.3 billion total is being paid to them in Cenovus Energy (CVE -0.15%) shares, which is who's buying these assets from them. So another Canadian oil-sands specialist buying these assets, but they're getting shares, so they still have exposure to the success or failure of these assets. They also have a five-year contingency in this deal where for every dollar that Western Canadian Select oil --

O'Reilly: This is way more complicated than I thought.

Muckerman: -- is above $52, which is a little ways away, to be fair. They're going to get $6 million every quarter for the next five years if, for every dollar Western Canadian Select is over $52 a barrel.

O'Reilly: So if it's at $62, they get $60 million?

Muckerman: They get $60 million that quarter.

O'Reilly: Oh, boy.

Muckerman: So they have a lot of upside.

O'Reilly: Kudos to ConocoPhillips; that actually feels a little bit better. I thought that was just, they bought these assets when oil was at $100 and now they're cutting their losses. But this is actually...

Muckerman: They're basically trimming their exposure from the $13.3 billion that this price suggests the assets were worth down to $10.6 billion with upside.

O'Reilly: It's been a while since we talked about this, but throughout even the downturn, oil frackers, domestic onshore in the United States, they've gotten even better at what they do. I think I saw a headline the other day, there was something in the Permian Basin, they're talking about profitable, that $20-$25, it's like, oh my gosh. Do you hear any kind of efficiency rumblings coming out of the oil sands?

Muckerman: Not to that degree. But they are slightly more efficient just because they have to be, because they're on the higher end of the cost curve. But if you listen to the IEA [International Energy Agency], they still expect Canada to be a significant contributor to global oil supply. That's not going to come without the oil sands. So what you're seeing here is global oil companies selling these assets, the buyers, who happened to be oil-sands specialists. So, Cenovus Energy, Canadian oil producer--

O'Reilly: So, this is the efficiency thing I'm talking about.

Muckerman: Yeah. So, these companies think, "We're probably better at this than ConocoPhillips or Shell or Marathon Oil." So, you have Canadian Natural Resources and Cenovus being buyers of this oil sands project, some of which they've already had stakes in with these companies, they're just buying the remainder of the stake. But also they're getting into some newer projects that they were previously a part of.

O'Reilly: I wonder if Suncor [Energy] up there, I know it was a Buffett holding for a while, I think he sold --

Muckerman: It was, they're the vertically integrated, they're the [ ExxonMobil ] of Canada.

O'Reilly: I wonder if they'll start, because they're good at getting oil out of the oil sands.

Muckerman: Yeah, that's also a part of their bread and butter.

O'Reilly: I wonder if they'll do anything. I always liked that company.

Muckerman: I don't know, because they're right along the lines with Canadian Natural Resources and Cenovus Energies of the world, where they understand oil sands. So it's not like they bought into it thinking, "This will be part of our portfolio." That's what they do.

O'Reilly: They have those giant trucks that you put the tar in.

Muckerman: Yeah. So I don't know if they'll be sellers. Maybe they had some bids out there for these last -- I don't know, I didn't see that. But if somebody else sells, maybe it's their turn.

O'Reilly: That'd be fun. So, this sounds like a good deal for everybody, because ConocoPhillips is getting some incentive if this works out --

Muckerman: And they're paying down debt.

O'Reilly: -- and people who are good at this are working the assets. There you go.

Muckerman: We'll follow it for a little while, because where oil prices are at today, it's probably not as lucrative to continue to develop these assets, but if oil demand continues to rise, Canada, like the IEA said, should play an important role.