Houston oil company buys Shell’s holdings in Permian
Houston-based ConocoPhillips plans to buy Royal Dutch Shell’s Permian business for $9.5 billion in one of the largest shale acquisitions since the pandemic-driven oil crash last year.
The all-cash deal cements ConocoPhillips’ position as a major player in the most prolific shale basin in the country and represents a major bet by the independent producer — with about 1,900 employees in Houston — on the future of shale after one of the worst oil busts in a generation. The deal, which includes around 225,000 acres in the Permian Basin of West Texas, is expected to close by the end of the year.
“We were presented with a unique opportunity to add premium assets at a value that meets our strict cost of supply framework,” ConocoPhillips CEO Ryan Lance said in a statement Monday. “Our financial strength allowed us to structure a competitive offer for this transaction and we are very excited to enhance our position in one of the best basins in the world with the addition of Shell’s high-quality assets and talented workforce.”
ConocoPhillips’ acquisition illus
trates the growing divide between U.S. and European oil giants in their approach to fighting climate change.
European oil majors, such as BP, Shell and TotalEnergies, have moved swiftly over the past year to shift from fossil fuels and expand investments in wind and solar power to meet their net-zero carbon emissions goals. They remain invested in highly profitable oil projects while divesting other oil assets to pay for their moves to cleaner energy sources.
Shell, in particular, has been aggressive in selling some of its fossil fuel operations to invest in a growing renewable-energy portfolio. The Hague-based oil giant is selling refineries in Alabama, Washington and Deer Park, east of Houston, while investing in solar and wind farms and electric-vehicle charging stations.
On the other hand, U.S. oil giants, such as Exxon Mobil, Chevron and ConocoPhillips, have been slower to shift from fossil fuels, betting that the world’s growing population will continue to rely on gasoline, jet fuel and natural gas to power their economies. Instead of focusing on renewables, these companies are looking to engineer their way out of the climate conundrum, investing heavily in carbon capture and storage technology to remove greenhouse gases from oil and gas operations and other polluting industries. At the same time, they also are moving to end routine flaring of excess natural gas from shale wells.
ConocoPhillips on Monday appeared to balance its growing ambition in the Permian Basin with growing investor and public concerns over climate change by raising its targets to reduce greenhouse gas emissions from its oil and gas operations. The company plans to reduce its greenhouse gas emission intensity by 40 to 50 percent by 2030, up from its previous target of 35 to 45 percent. The intensity is the ratio of emitted greenhouse gas to barrels of oil equivalent produced.
“The assets we’re adding are consistent with our low cost-ofsupply strategy, which is designed to position our portfolio as the most likely to be developed as the energy transition progresses and the need for oil and gas is reduced over time,” Lance said. “The assets we’re adding improve our ability to generate returns that are consistent with what investors demand through cycles. And the assets we’re adding will bring more low greenhouse gas intensity barrels to our mix.”
Monday’s deal is ConocoPhillips’ second major acquisition in less than a year. In January it completed its purchase of Concho Resources for $9.7 billion, which allowed ConocoPhillips to become the largest independent oil and gas company nationally and a dominant operator in the Permian Basin.
The purchase comes as oil companies have pledged to maintain financial discipline after the oil bust in an effort to woo investors back to the energy sector. ConocoPhillips in particular has long focused on returning capital to shareholders instead of funneling revenue to growing production.
Cognizant of shareholder and investor demands, ConocoPhillips on Monday increased its quarterly dividend to 46 cents per share from 43 cents. The company estimates that 2022 production from Shell’s Permian assets will be around 200,000 barrels per day.