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Houston-based ConocoPhillips agreed on Monday to commit $ 9.5 billion to purchase the Permian Basin portfolio from Royal Dutch Shell plc Shell’s Permian business comprises 225,000 net acres with current production of around 175,000 boe / d. Shell Enterprise LLC has entered into the agreement, which is subject to regulatory approval.
“After considering several strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips has proven to be a very compelling value proposition,” said Wael Sawan, director of Shell upstream. “This decision once again reflects our focus on value rather than volume and a disciplined use of capital.”
Shell is aiming for net zero emissions by 2050 and has invested in a large number of low-carbon companies and technologies for this purpose. During the conference call in the 2nd quarter of 2021, CEO Ben van Beurden discussed how Shell is advancing its climate-neutral strategy.
A Dutch court ruled in May that Shell must reduce its carbon dioxide (CO2) emissions by 45% in 2030, significantly more than the company planned. Shell’s goal is to reduce CO2 emissions by 20% compared to 2019 by the end of the decade. The company also aims to become a net zero emissions company by 2050, with emissions cut by 45% by 2035.
The landmark ruling by the District Court in The Hague, where the super major is headquartered, would be from Shell demand to reduce the CO2 emissions of the entire group of companies by 45% by 2030, also known as Scope 1 emissions. It would also apply to the 2019 emissions reductions from suppliers and customers, also known as Scope 2 and Scope 3 emissions.
“We have indeed made it very clear that we are upgrading, accelerating, reinforce, etc. ” Decarbonization efforts, said van Beurden in July. Shell unveiled a stricter carbon reduction strategy in February, three months before the court ruling.
Shell said most of its Midland, TX-based employees work in Perm-related activities and “many employees with Houston based “ConocoPhillips will offer employment upon completion of the transaction.
Shell found that its Permian operations since 2017 have reduced greenhouse gas and methane intensity by 80%” through investments in infrastructure and technology.
The cash proceeds from the sale, which is expected to close by the end of the year, would be used by Shell to fund $ 7 billion in additional shareholder distributions and to reduce debt. Shell’s Permian business recorded a pre-tax operating loss of $ 491 million in 2020. The ConocoPhillips transaction is expected to result in after-tax profits of $ 2.4 billion to $ 2.6 billion.
Morgan Stanley & Co. LLC and Tudor, Pickering, Holt & Co. are acting as financial advisor to Shell, while Norton Rose Fulbright is serving as legal advisor.
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Natural gas prices continued to rise in Asia and Europe on Monday as competition for limited liquefied natural gas (LNG) loads intensified on the spot market with two U.S. plants. Freeport LNG in Texas continues to have production problems after Tropical Storm Nicholas lost power last week. The setup did not restart completely …
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