LNG giant Shell said it has reached an agreement for the sale of its Permian business to ConocoPhillips for $9.5 billion in cash.
The transaction would transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals, Shell said in a statement on Monday.
Shell entered the deal via its unit Shell Enterprises.
The Hague-based energy giant said its Permian business includes ownership in approximately 225k net acres with current production of around 175 thousand barrels equivalent per day.
According to Shell, majority of Midland-based Permian employees and many Houston-based employees would be offered employment by ConocoPhillips.
Shell said its 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.”
Also, the firm would use cash proceeds from this transaction to fund $7 billion in additional shareholder distributions after closing. It would use the remainder for further strengthening of the balance sheet.
These distributions would be in addition to Shell’s 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 the fourth quarter of this year.
“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,” Sawan said.