Royal Dutch Shell, whose LNG sales tops 60 million tonnes per annum (mtpa), has agreed to divest its interests in the US Permian Basin to ConocoPhillips for $9.5 billion in cash. Shell’s assets in the Permian include around 225,000 net acres with current production of around 175,000 barrels per day equivalent.
Cash proceeds from this Permian transaction will be used to fund $7 billion in additional shareholder distributions after closing, Shell said, with the remainder used for further strengthening of the balance sheet. Permian business recorded a before-tax operating loss of $491 million in 2020 and the transaction was expected to result in an after-tax gain of $2.4 billion to $2.6 billion, subject to adjustments.
“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,” he commented.
Spanning West Texas and southeast New Mexico, the Permian Shale is one of the main sources of associated feed gas from oil for LNG export plants and projects under development on the US Gulf Coast. Shell’s main activities in the Permian Shale are in exploring and producing light tight oil (LTO), and it is one of several shale basins in the Americas where the company is present. In North America, Shell’s shale gas and oil projects also include the Delaware Basin portion of the Permian and Canadian assets in the Duvernay and Montney plays in Alberta along with the Montney gas play in British Columbia.
Shell’s US portfolio of operated companies and interests consists of oil, natural gas, petrochemicals, gasoline, lubricants, and other refined products along with renewables such as wind and solar.