Upstream

Shell exits the Permian basin after $9,5 billion sale to ConocoPhillips

Shell

Shell will exit the Permian basin after a $9,5 billion sale to ConocoPhillips. The company announced the divestment on Monday, shortly after it announced that its West Delta platform in the U.S. Gulf of Mexico sustained damage after Hurricane Ida.

The sale marks an impactful shift for the company, as it is an exit from the second-largest U.S. oilfield. On the other hand, for ConocoPhillips, the acquisition is the second of such scale in a year.

As reported earlier, Shell is under pressure from investors and stakeholders to transit faster into the energy transition. Also, to reduce its CO2 emissions footprint and fight climate change. In fact, in the whole industry, there is a trend rising. A trend of divesting from hydrocarbons in order to move towards cleaner sources.

European companies such as BP and Shell indeed have set ambitious targets for moving their production away from fossil fuels; in the case of BP, its renewable energy arm, Lightsource BP, is rapidly growing its portfolio in wind and solar.

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Shell to increase shareholders dividends

In contrast, some U.S. producers like ExxonMobil and Chevron are doubling their investments in hydrocarbons; however, they’re pushing solutions like hydrogen, and renewable fuels. As Reuters reports, ConocoPhillips aligns with this trend after acquiring the Permian basin assets from Shell. However, Conoco recently announced it would tighten its targets for cutting greenhouse gas emissions.

Particularly, the acquisition was for around 225,000 net acres, as well as over 600 miles of associated infrastructure, according to the statement. After the purchase, ConocoPhillips will increase its portfolio of currently 750,000 net acres in the Permian.

On the other hand, Shell said that the cash proceeds would fund a $7 billion shareholder distributions after the closing. It will be an increase from the original $4 to $5 billion dividend payments.

Finally, Wael Sawan, Shell’s Upstream Director said. “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.”

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