Shell has agreed to acquire Canadian shale producer ARC Resources for $16.4 billion, including debt, marking its largest acquisition since buying BG Group a decade ago. The deal includes $13.6 billion in cash and shares and taking on ARC’s $2.8 billion debt.
Key Takeaways
Shell has agreed to buy Canadian shale producer ARC Resources for $16.4 billion, marking its largest acquisition since buying BG Group a decade ago. The deal includes $13.6 billion in cash and shares and taking on ARC’s $2.8 billion debt.
- Shell acquires ARC Resources for $16.4B, including debt
- Deal adds 370,000 barrels per day to Shell's production
- Acquisition boosts Shell's production growth target from 1% to 4%
- ARC's assets are focused on the Montney shale basin in Canada
- Shell shares fell slightly following the announcement
The acquisition will add approximately 370,000 barrels of oil equivalent per day to Shell's production, boosting its output growth target from 1% to 4%. According to Reuters, the deal is expected to generate double-digit returns and boost free cash flow per share from 2027. ARC Resources primarily produces gas and condensate in the Montney shale basin in British Columbia and Alberta.
Shell CEO Wael Sawan described ARC as a "high-quality, low-cost and top quartile low carbon intensity producer" that will strengthen Shell's resource base for decades. The acquisition is seen as a strategic move to bolster Shell's operations in North America following the sale of its US shale business in 2021.
Analysts had previously indicated that Shell needed an acquisition or exploration breakthrough to offset production shortages expected due to ageing fields. According to The Guardian, Eric Nuttall, a senior portfolio manager at Ninepoint Partners, stated that Shell is paying a fair valuation given ARC's deep inventory and the low likelihood of a counterbid.
Shell shares fell slightly following the announcement, with CNBC reporting a 0.3% decrease in trading. The company is expected to report significantly higher profits from its trading desks due to market volatility triggered by the Iran crisis when it reports its first-quarter results on May 7.
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