Oil giant Shell has finalized a $22 billion agreement to purchase ARC Resources Ltd., uniting the primary partner in Canada’s inaugural functioning liquefied natural gas venture with a significant producer in one of North America’s most lucrative shale regions.
Wael Sawan, CEO of the U.K.-based global energy powerhouse, declared on Monday that the deal “cements Canada as a core area for Shell,” which had previously divested its substantial presence in the oilsands. Sawan added that the acquisition allows Shell to access strategically positioned assets and incorporate proficient colleagues, which, combined with Shell’s robust basin-level performance, offers an attractive proposition for shareholders.
ARC Resources specializes in the Montney, a shale formation spanning northeastern British Columbia and northwestern Alberta. ARC’s CEO, Terry Anderson, stated in a release that through this acquisition, they will unlock substantial value and become part of a dynamic global energy leader capable of maximizing their business potential and contributing to Canada’s promising energy future.
Last year, ARC achieved a daily production of 374,000 barrels of oil equivalent before royalties. Its operations are in close proximity to Shell’s Montney holdings in both provinces. Tom Pavic, president of Sayer Energy Advisors in Calgary, emphasized the significance of the proposed acquisition in highlighting the Montney as a top-tier resource play, anticipating further merger and acquisition activity in the region.
Under the terms of the proposal, ARC shareholders will receive 0.40247 of a Shell share and $8.20 in cash for each ARC share, amounting to $32.80 per ARC share. The overall value of the deal, including assumed debt, is estimated at $22 billion.
Shell, along with four Asian partners, co-owns the LNG Canada plant in Kitimat, B.C., operational since last summer. The facility processes natural gas from Montney fields and other locations in western Canada, converting it into a liquid form for export across the Pacific. The consortium is contemplating doubling the plant’s capacity, with industry experts indicating a potential positive final investment decision following the recent agreement.
ARC is actively engaged in the LNG sector through long-term supplier contracts, including agreements with LNG Canada and Cedar LNG, a plant under construction in Kitimat. Shell’s strategic shift away from Alberta’s oilsands to focus on gas production, oil refining, and retail operations aligns with its global integrated gas business strategy, solidifying the Montney as a crucial player in the global gas market.
The acquisition of ARC by Shell marks the latest major transaction in the western Canadian shale gas sector. Enbridge Inc. has also shown optimism in Canadian natural gas with a $4 billion plan to expand its Westcoast pipeline in B.C., receiving recent government approval for the project.
In addition to securing shareholder and court approvals, the Shell-ARC deal is subject to regulatory clearance under the Investment Canada Act. The transaction is anticipated to be finalized in the latter half of this year.