NorthAmOil: ConocoPhillips snaps up Shell’s Permian assets

Royal Dutch Shell has agreed to sell its portfolio of shale assets in the US’ Permian Basin to ConocoPhillips for $9.5bn in cash.
Shell’s assets cover around 225,000 net acres (910.5 square km) and produce about 175,000 barrels of oil equivalent per day (boepd). The Anglo-Dutch super-major said on September 20 that after having reviewed “multiple strategies and portfolio options” for the assets, the ConocoPhillips deal had emerged as the most compelling value proposition.
“This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital,” Shell Enterprises’ upstream director, Wael Sawan, said.
Shell intends to use the proceeds from the sale to fund $7bn worth of additional shareholder distributions after closing. The super-major, noting that its Permian business had recorded a pre-tax operating loss of $491mn in 2020, added that the remainder of the proceeds would be used to strengthen its balance sheet.
Shell said it expected to close the transaction, which has an effective date of July 1 and is still subject to regulatory approvals, in the fourth quarter of this year.
The deal is the latest in a line of such consolidations across the shale industry and is similar in size to ConocoPhillips’ $9.7bn acquisition of Concho Resources in January. That deal, which was announced in October 2020 and represented the largest US shale-focused acquisition that year, significantly expanded ConocoPhillips’ holdings in the Permian. Concho held drilling rights across roughly 800,000 gross acres (3,237 square km) in the Permian.
ConocoPhillips CEO Ryan Lance said at the time that the deal delivered “unmatched scale and quality across” value drivers within its business.
The sale of Shell’s Permian assets, meanwhile, reflect the company’s continued focus on both boosting shareholder value while also transforming the super-majopr into a “provider of net-zero emissions energy products and services”. The super-major has set a goal of net-zero emissions by 2050.
Shell said in February that it intended to maintain underlying operating expenses in the near term of no more than $35bn, pursue annual divestments averaging $4bn and maintain a “progressive” dividend policy.