Shell Enterprises, a subsidiary of Royal Dutch Shell, reached an agreement for the sale of its Permian business for $9.5 billion in cash to ConocoPhillips, a shales developer in the basin. The transaction will transfer all of Shell’s interest in Permian to ConocoPhillips, subject to regulatory approvals.
Shell’s Permian business includes ownership in approximately 225 thousand net acres with current production of around 175 thousand barrels equivalent per day. Since 2017, Shell’s Permian operations have reduced green house gas and methane intensity by 80% through investment in infrastructure and technology.
“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, 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.”
Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.
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. These distributions will be in addition to the shareholder distributions in the range of 20-30% of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.
The majority of midland-based Permian employees and many Houston-based employees will be offered employment by ConocoPhillips with effect upon closing in accordance with the terms and conditions of the transaction.