Shell Enterprises LLC, a subsidiary of Shell, has reached an agreement for the sale of its Permian business to ConocoPhillips for US$9.5 billion in cash.
The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.
Shell’s Permian business includes ownership in approximately 225 000 net acres with current production of around 175 000 boe/d.
"After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition," said Wael Sawan, Shell Upstream Director. "This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions."
The cash proceeds from this transaction will be used to fund US$7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30% of cash flow from operations. The effective date of the transaction is 1 July 2021 with closing expected in 4Q21.
“We were presented with a unique opportunity to add premium assets at a value that meets our strict cost of supply framework and brings financial and operational metrics that are highly accretive to our multi-year plan,” said Ryan Lance, ConocoPhillips chairman and CEO. “Our financial strength allowed us to structure a competitive offer for this transaction and we are very excited to enhance our position in one of the best basins in the world with the addition of Shell’s high-quality assets and talented workforce. The transaction will be funded from available cash while still retaining a significant level of cash on the balance sheet for general purposes. Our underlying business drivers will be stronger and the expanded cash flows derived from this transaction mean shareholders will benefit from higher returns of capital consistent with our commitment to return of capital of at least 30% of cash from operations.”
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