Shell has agreed to acquire Arc Resources in a transaction valued at $13.6 billion, expanding its operational footprint in Western Canada. The move is anticipated to increase production as Canada seeks to expand its energy exports.
The energy companies announced on Monday that they have entered into a definitive agreement. Under the terms, Shell will pay 8.20 Canadian dollars in cash plus 0.40247 of a Shell share for each Arc share.
The total consideration consists of approximately 25% cash and 75% stock, valuing each Arc share at C$32.80, which represents a 27% premium over Arc's previous closing price. Shell will also assume approximately $2.8 billion in debt and leases, raising the total enterprise value of the deal to $16.4 billion.
Arc Resources is focused on the Montney shale basin, which spans the border between British Columbia and Alberta. Its assets are located in the same region as Shell's existing Groundbirch assets in British Columbia and the adjacent Gold Creek project in Alberta. Last year, Arc's production averaged 374,000 barrels of oil equivalent per day before royalties.
Shell stated that the acquisition is expected to increase its annual production growth rate to 4% starting in 2025, up from a previous target of 1%. It will also support Shell's goal of maintaining liquid production of 1.4 million barrels per day through 2030 and beyond. The transaction will additionally increase Arc's natural gas reserves, thereby supporting Shell's liquefied natural gas production in Canada.
The deal will combine Arc's position of over 1.5 million net acres in the Montney region with Shell's 440,000 acres. It will add 2 billion barrels of oil equivalent in proved plus probable reserves by the end of 2025.
Shell's Chief Executive Officer, Wael Sawan, said, "This makes Canada a heartland for Shell and further advances our strategy of creating more value with lower emissions." He described Arc as a high-quality, low-cost producer with carbon intensity in the top quartile for low emissions.
Arc stated that the proposal offers its shareholders near-term liquidity through highly liquid Shell shares, along with upside potential through access to a global energy platform.
The planned acquisition comes as Canada seeks to counter protectionist trade policies from the Trump administration. Canadian Prime Minister Mark Carney has pledged to increase exports to non-U.S. markets and position Canada as an energy superpower, prioritizing the accelerated development of major infrastructure and resource projects.
Shell's Groundbirch assets supply gas to the LNG Canada liquefaction facility, in which Shell holds a 40% stake, as well as to the domestic Canadian natural gas market.
Last week, Ottawa approved an approximately C$3 billion expansion of Enbridge's West Coast natural gas pipeline. This project will provide up to 300 million cubic feet per day of additional capacity for domestic users and for export in the form of liquefied natural gas.
Shell indicated that the Arc transaction is expected to generate double-digit returns, strengthen long-term cash flow, and increase free cash flow per share starting from 2027. The boards of both companies have unanimously approved the deal, which is anticipated to close in the second half of this year, pending approval from Arc shareholders and regulatory authorities.
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