Royal Dutch Shell (RDS.B) - Get Royal Dutch Shell Plc Sponsored ADR Class B Report has signed an agreement to sell its Permian basin assets to ConocoPhillips (COP) - Get ConocoPhillips Report for $9.5 billion cash, the company said in a Monday statement.
The transaction will transfer all of subsidiary Shell Enterprises’ interest in 225,000 net acres in the Permian basin to ConocoPhillips, a leading shales developer, subject to regulatory approvals, the company said.
The effective date of the sale was July 1, with closing expected in the fourth quarter of 2021, Shell said in the statement.
"After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition," Wael Sawan, upstream director, said in the statement. "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."
The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet, the company said. The distributions will be in addition to the company’s shareholder distributions in the range of 20%-30% of cash flow from operations.
Shell's Permian employees in Midland, Texas, and Houston will be offered employment with ConocoPhillips under terms and conditions of the transaction, the statement said.
Morgan Stanley and Tudor, Pickering Holt & Co. are serving as Shell’s financial advisers and Norton Rose Fulbright served as legal adviser for the divestment.
Shares of Royal Dutch Shell on Monday rose 2.2% to $40.36 in after-hours trading. The stock closed down 2.16% at $39.49. Shares of ConocoPhillips on Monday rose slightly by 0.1% to $57.14 after hours. The stock had closed down 3.1% to $57.07.