Page 9 - NorthAmOil Week 48 2021

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Shell completes $9.5bn Permian

sale to ConocoPhillips

PERMIAN BASIN A subsidiary of Royal Dutch Shell has completed on “value over volumes” and “disciplined stew-
the sale of its Permian Basin business to Cono- ardship of capital”. The super-major is under
coPhillips for $9.5bn in cash. The transaction mounting pressure to decarbonise its operations
includes Shell’s 225,000 net acres (911 square and has been shedding some of its oil and gas
km) in the basin and current production of assets in line with this.
175,000 barrels of oil equivalent per day (boepd). However, at the same time, news has emerged
The sale is the latest in a series of mega-deals that Shell is considering a return to Libya. Two
The purchase of Shell’s centred on the prolific Permian Basin. sources told Reuters this week that the company
Permian assets makes According to data analytics firm Enverus, had a plan to develop new oil and gas fields and
ConocoPhillips the the purchase of Shell’s Permian assets makes infrastructure, as well as a solar project, in the
second-largest producer ConocoPhillips the second-largest producer in North African country. Reuters also cited a sen-
in the basin. the basin. It had previously ranked fourth after ior company source as saying that the Permian
acquiring Concho Resources at the start of 2021. sale to ConocoPhillips had freed up about $1bn
“After waiting patiently on M&A opportu- for other upstream activities.
nities through the land-rush years of the shale Shell said that the cash proceeds from the Per-
boom, Conoco has been able to pick up prime mian transaction would be used to fund $7bn in
Permian real estate at what looks to be attractive additional shareholder distributions, with the
price points,” Enverus’ senior mergers and acqui- remainder used for further strengthening its bal-
sitions analyst, Andrew Dittmar, was quoted by ance sheet. Indeed, on December 2, a day after
Bloomberg as saying. the transaction closed, Shell said it had started up
Shell reiterated that the deal reflects its focus to $1.5bn of share buybacks under this plan.™

Chesapeake launches $1bn

worth of stock buybacks

US SHALE producer Chesapeake Energy has the long term,” he added.
authorised the repurchase of up to $1bn of its Dell’Osso was recently appointed as Chesa-
stock. The move is the latest to illustrate the focus peake’s CEO after Doug Lawler abruptly stepped
on shareholder returns among shale drillers. down in April. After Lawler’s departure, Mike
The company estimates that the total cash Wichterich briefly served as interim CEO prior
dividends to be paid to shareholders in 2022 to Dell’Osso’s appointment in October.
will range from $800mn to $1bn, based on its On top of the changes in leadership, Chesa-
Chesapeake has pivoted latest outlook and the current commodity price peake has been through a period of turbulence,
back to natural gas environment. in large part thanks to the coronavirus (COVID-
after emerging from “Despite the volatility in commodity mar- 19) pandemic. The company entered Chapter
bankruptcy protection. kets, our cash flow projections remain robust, 11 bankruptcy protection last year following
supporting a $1.75/share base dividend plus the collapse in oil prices that followed the onset
a variable dividend equal to 50% of our free of the pandemic. It emerged from bankruptcy
cash flow,” Chesapeake’s president and CEO, protection in February 2021, having eliminated
Nick Dell’Osso, stated. “The addition of a $1bn roughly $7bn worth of debt.
equity buyback programme, which we expect Since its emergence from bankruptcy, Ches-
to execute over the next 24 months, highlights apeake has pivoted back to natural gas – its
the advantages of our disciplined capital allo- original focus – following a period of targeting
cation strategy, our resiliency through com- oil production under Lawler. In November,
modity price cycles, and our commitment to the company completed its acquisition of Vine
maintaining a capital reinvestment rate in our Energy, which expanded its footprint in the
business to sustain our current cash flow over Haynesville shale gas play.™

Week 48 02•December•2021 www. NEWSBASE .com P9