Shell, the oil giant, has inked a massive $22 billion agreement to purchase ARC Resources Ltd. This move brings together the primary partner in Canada’s initial operational liquefied natural gas project with a significant producer in one of the most lucrative shale regions in North America.
Wael Sawan, the CEO of the U.K.-based global energy leader, stated on Monday that the deal “solidifies Canada as a core location for Shell,” which previously reduced its substantial presence in the oilsands years ago.
“We are acquiring strategically positioned assets and embracing team members with extensive expertise that, combined with Shell’s robust basin-level performance, offers a compelling opportunity for shareholders.”
ARC Resources is dedicated to the Montney, a shale formation spanning parts of northeastern British Columbia and northwestern Alberta.
“Through this acquisition, we will unlock this significant value and join a vibrant global energy leader capable of realizing our business’s full potential and supporting Canada’s promising energy future,” mentioned ARC CEO Terry Anderson in a statement.
Deal Highlights Montney’s Value
ARC recorded a production of 374,000 barrels of oil equivalent per day before royalties last year. Its operations are adjacent to Shell’s Montney holdings in both provinces.
“It underscores the Montney’s status as a top-tier resource play,” commented Tom Pavic, the president of Sayer Energy Advisors in Calgary, regarding the proposed purchase.
“I anticipate seeing more merger and acquisition activities in the Montney region, without a doubt.”
As per the proposal, ARC shareholders will receive 0.40247 of a Shell share and $8.20 in cash for each ARC share they hold.
The offer is valued at $32.80 per ARC share, based on Shell’s closing price and exchange rates on April 24 when ARC shares concluded at $25.77.
Overall, the companies estimate the deal at $22 billion, encompassing assumed debts.
LNG Canada Plant Capacity Potentially to Double
Shell, along with four Asian firms, holds the LNG Canada plant in Kitimat, B.C., which commenced operations last summer. The plant processes natural gas from Montney fields and other regions in western Canada, converting it into liquid form for exportation via specialized tankers across the Pacific.
The consortium contemplates doubling the plant’s capacity through a second phase, signaling a probable positive final investment decision, according to Pavic.
On the other hand, ARC is actively engaged in the LNG sector through long-term agreements as a supplier, including with LNG Canada. Additionally, two years ago, it secured a long-term liquefaction tolling services deal with Cedar LNG, another Kitimat-based plant jointly owned by Pembina Pipeline and the Haisla Nation.