Shell has reached an agreement to sell its Permian business to ConocoPhillips for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian 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, 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.”
The upstream business plays a critical role in Shell’s 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 to further strengthen the balance sheet. These distributions will 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 1 July 2021, with closing expected in Q4 2021.
Shell’s Permian business includes ownership in approximately 225,000 net acres, with current production of around 175,000 barrels equivalent per day. The company expects a 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.