Royal Dutch Shell Sells Permian Business to ConocoPhillips

Royal Dutch Shell plc has announced that its subsidiary, Shell Enterprises LLC, has reached an agreement for the sale of its Permian business to ConocoPhillips for $9.5 billion in cash.

The deal will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals. Shell’s Permian business includes ownership in approximately 225,000 net acres with a current production of around 175,000 barrels equivalent per day. The majority of the company’s Midland-based Permian employees, and many Houston-based employees, will be offered employment by ConocoPhillips, according to Shell.

Shell noted that proceeds from the transaction will be used to fund $7 billion in additional shareholder distributions, with the remainder used for further strengthening of the balance sheet. The distributions will be in addition to its shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, with closing expected in the fourth quarter.

ConocoPhillips highlighted that the transaction does not impact the company’s previously announced intention to reduce gross debt over the next several years. The business also revealed that, in conjunction with this transaction, it plans to increase its targeted level of dispositions from the previously announced $2-3 billion to $4-5 billion by 2023. The additional $2 billion of planned dispositions are expected to be sourced primarily from the Permian Basin as part of the company’s ongoing portfolio high-grading efforts.

In May this year, Shell revealed that it had reached an agreement for the sale of its interest in the Deer Park Refining Limited Partnership for a consideration of $596 million. During the same month, Shell signed a deal with Malampaya Energy XP Pte Ltd for the sale of its 100 percent shareholding in Shell Philippines Exploration B.V. for a base consideration of $380 million, and in February Shell reached an agreement with Crescent Point Energy Corp. to sell its Duvernay shale light oil position in Alberta for a total consideration of $707 million.