Royal Dutch Shell reached an agreement to sell its Permian Basin business to ConocoPhillips, a leading shale developer in the area for $9.5 billion in cash, Shell Enterprises, a subsidiary of the company announced on Tuesday.
The transaction will transfer all of Shell’s interest in the basin 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, Shell’s 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,” he added.
The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet, the company said.
“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 July 1, 2021, and closing is expected in the fourth quarter of 2021,” a Shell statement read.
Over 966 kilometers (600 miles) of petroleum, gas, and water pipelines and infrastructure are among the assets, which span almost 225,000 net acres and producing properties in Texas.
Production from these assets is estimated to be around 200 million barrels per day in 2022, with roughly half of it being operational.
By Sibel Morrow