Royal Dutch Shell, through its subsidiary Shell Enterprises, has agreed to divest its Permian Basin operations in the US to ConocoPhillips in an all-cash deal of $9.5bn.
The assets involved in the deal are located in the Delaware Basin and spread over a total of 2,25,000 net acres.
The current production of the assets is nearly 1,75,000 barrels equivalent per day (MBOED). The assets are all located in Texas.
Their production for 2022 is estimated to be around 200MBOED, of which nearly half is operated.
Apart from the upstream assets, ConocoPhillips will be acquiring more than 965.6km of operated crude, gas, and water pipelines, and infrastructure as part of the deal.
Shell upstream director Wael Sawan said: “After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition.
“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 said that it will use the cash proceeds from the deal for funding $7bn in additional shareholder distributions. The rest of the amount will be used for further consolidating its balance sheet, said the company.
According to ConocoPhillips, the assets being acquired are complementary and highly accretive.
The US-based oil and gas company said that the combination of the assets to be acquired and its multi-basin Lower 48 portfolio will enable it to deliver considerable incremental upside.
ConocoPhillips chairman and CEO Ryan Lance said: “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.
“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 deal, which is subject to regulatory clearance and other customary closing conditions, is anticipated to close in Q4 2021.
