Shell is to sell its assets in the Permian Basin to ConocoPhiliips for $9.5 billion cash. The assets are all in Texas and amount to 225,000 net acres and 600 miles of related pipelines and infrastructure. The purchase price of $47,500 per barrel of oil equivalent is in line with other recent transactions in the Permian Basin.
The effective date of the transaction is July 1, 2021, with an anticipated closing date in the fourth quarter.
Shell acquired the bulk of the assets in 2012 from Chesapeake Energy for $1.9 billion. It expects to book an after-tax gain of $2.4 to $2.6 billion once the deal closes. The company plans to pay a special dividend to shareholders of $7 billion.
The majority of Shell’s Midland-based Permian employees and many Houston-based employees will be offered employment by ConocoPhillips.
In June, a Dutch court ruled that Shell was partially responsible for climate change and ordered the company to reduce its carbon emissions (in absolute levels) by 45% by 2030, compared with 2019 levels. Shell had already committed to a 45% (relative) reduction in net carbon intensity (i.e. the volume of carbon per unit of energy) by 2035.
Shell has been in the process of selling off assets in Egypt, Nigeria and Australia. It also sold its Alberta shale light oil production for $707 million in February. It plans to invest more in low-carbon fuels (biofuels and hydrogen) and carbon capture and storage.
ConocoPhillips has a target to reduce greenhouse gas emissions intensity by 35-45% by 2035 from a 2016 baseline. Shell probably felt some pressure to sell to someone with somewhat similar goals in terms of emissions reductions.