The deal would add about 370,000 barrels a day of oil and gas to Shell's production, boosting its annual production growth from 1% to 4%, according to multiple reports. ARC mainly produces gas and condensate, and Shell said the acquisition would add 2bn barrels to its proved and probable reserves. The timeline for regulatory approval remains unclear, as does the exact split between debt and equity financing beyond the stated amounts.
Analysts have previously said Shell needed an acquisition or exploration breakthrough to bolster its production and reserves. Wael Sawan, Shell's chief executive, said the deal would make Canada a 'heartland' for Shell and strengthen its resource base for decades, adding: 'We are accessing uniquely positioned assets and welcoming colleagues that bring deep expertise which, combined with Shell's strong basin level performance, provides a compelling proposition for shareholders.' The move marks a return to shale in North America after Shell sold its US shale business in the Permian Basin to ConocoPhillips in 2021 for $9.5bn, and it strengthens Shell's position as one of the largest players in LNG.
We are accessing uniquely positioned assets and welcoming colleagues that bring deep expertise which, combined with Shell's strong basin level performance, provides a compelling proposition for shareholders.
Shell has a history of major gas acquisitions, including the £47bn purchase of BG Group in 2015. It owns a 40% stake in LNG Canada, a $40bn liquefied fossil gas plant on the west coast of Canada, and Shell said it either owns or is involved with more than 30% of global LNG capacity and is the world's largest trader of the fuel. Earlier this year, Sawan said Shell had spent about $2bn buying assets last year that would add about 40,000 barrels per day of new production by the end of the decade.
According to The Guardian - Business, Eric Nuttall of Ninepoint Partners said Shell is paying a fair valuation given ARC's deep inventory and the low likelihood of a counterbid. Shell is due to report results for the first quarter on 7 May and is expected to report 'significantly higher' profits from its trading desks due to market volatility triggered by the Iran crisis. Shares in Shell were down 1.2% on Monday afternoon. The deal's impact on Shell's debt levels and shareholder returns, such as dividends or buybacks, has not been disclosed.
We think they’re paying a fair valuation given the deep inventory that ARC has and the likelihood of a counterbid to be low.