Shell to Sell Permian Interest for USD 9.5 billion to ConocoPhillips

Shell Enterprises, a subsidiary of Royal Dutch Shell, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for USD 9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.

“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, 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.”

Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive, and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.

The cash proceeds from this transaction will be used to fund USD 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 the shareholder distributions in the range of 20-30% of cash flow from operations. The effective date of the transaction is July 1, 2021, with closing expected in Q4 2021.

Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.

 

Key facts

• Shell’s Permian business includes ownership in approximately 225k net acres with current production of around 175 thousand barrels equivalent per day.
• The gross assets that are subject of this transaction amounted to USD 10.5 billion December 31, 2020. The Permian business recorded a before-tax operating loss of USD 491 million for the year ended December 31, 2020. The transaction is expected to result in an after-tax gain of USD 2.4 to USD 2.6 billion, subject to adjustments.
• A further update to Shell’s oil production outlook and portfolio will be provided with fourth quarter earnings.
• Majority of Midland-based Permian employees and many Houston-based employees will be offered employment by ConocoPhillips with effect upon closing in accordance with the terms and conditions of the transaction.
• Since 2017, Shell’s Permian operations have reduced greenhouse gas and methane intensity by 80% through investment in infrastructure and technology.
• Morgan Stanley & Co. LLC and Tudor, Pickering, Holt & Co. are serving as Shell’s financial advisors and Norton Rose Fulbright is serving as Shell’s legal advisor for the divestment.
• Shell is one of America’s leading energy companies with interests in 50 states employing more than 15,000 people. Shell’s U.S. portfolio of operated companies and interests consists of oil, natural gas, petrochemicals, gasoline, lubricants, and other refined products along with renewables such as wind, solar, and mobility options like electric vehicle charging and hydrogen. In the U.S. Shell is also investing in an integrated power business that will provide electricity to millions of homes and businesses.