Shell agrees $9.5bn Permian Basin deal with ConocoPhillips

(Sharecast News) - Royal Dutch Shell is to exit the Permian Basin after striking a $9.5bn deal with US major ConocoPhillips.
The Permian Basin, a shale formation that stretches across Texas and New Mexico, is America's biggest oilfield and accounts for around 40% of US oil production. Shell's Permian business includes ownership in around 225,000 net acres, with current production of around 175,000 barrels equivalent per day.

The Anglo-Dutch firm is looking to transition away from oil and gas assets, however, in favour of renewable sources of energy. Earlier this year it said it wanted net zero emissions for itself and for products used by its customers by 2050. Since then, a Dutch court ordered Shell must cut its CO2 emissions by 2030 by 45% compared to 2019 levels.

Wael Sawan, Shell's upstream director, said: "After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling proposition.

"This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital."

Ryan Lance, chief executive of ConocoPhillips, said: "We were presented with an 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."

Proceeds from the cash sale will be used to fund $7bn in additional shareholder distributions, Shell confirmed, with the remainder used to strengthen the balance sheet.

Sawan added: "This transaction...provides excellent value to our shareholder through accelerating cash delivery and additional distributions."

As at 1115 BST, shares in Shell were ahead 4% in London at 1,500.4p.

Henry Tarr, analyst at Berenberg, said: "We expect the announcement to be taken positive, with the sale boosting shareholder returns materially, reducing carbon emissions and reducing debt levels.

"The sale will, however, leave the company with a smaller asset base with which to cover and grow the dividend."

The deal is expected to close in the fourth quarter of 2021.