Houston-based Shell Enterprises, subsidiary of Royal Dutch Shell, said Monday it reached agreement for the sale of its Permian Basin business to ConocoPhillips for $9.5 billion. The transaction will transfer all of Shell’s assets in Permian Basin to ConocoPhillips. Shell’s Permian business includes ownership of about 225,000 net acres on the Texas side of the Delaware Basin with current production of 175,000 boed along with 600 miles of operated oil, gas and water pipelines. Conoco said the acquired assets are expected to produce 200,000 boed in 2022. Most of Shell’s operations are focused on Wolfcamp, Bone Spring and Avalon formations, where in 2020 it operated 3 rigs. Bloomberg said data from Enverus show the deal will make Conoco the No. 2 producer in Permian behind Pioneer.
Wael Sawan, Shell upstream director, said, “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital.” Ryan Lance, ConocoPhillips CEO, added, “We were presented with a unique opportunity to add premium assets at a value that meets our strict cost of supply framework and brings financial and operational metrics that are highly accretive to our multi-year plan.” Closing is expected in 2021Q4.
Arvind Ravikumar of the sustainable energy transitions lab at University of Texas told Texas Tribune, “You’re not reducing emissions. You’re just transferring who produces them.” The Tribune added, “For Shell, the motivation for the sale was to meet the company’s goals of shrinking its carbon dioxide emissions and to increase its share of renewable energy sources – objectives made legally binding by a Dutch court this summer. The company has also faced pressure to reduce its oil and gas production and produce more clean energy in response to concerns from investors and the public about climate change.”