Shell to acquire Canada's ARC in output-boosting $16.4-B deal
Shell to acquire Canada's ARC in output-boosting $16.4-B deal
- Shell says it will take on $2.8 B in net debt
- Analysts said Shell needed exploration success or a deal
- ARC acquisition to boost Shell's output by 370,000 boed
Shell has agreed to buy Canadian energy company ARC Resources in a $16.4-B deal which the British oil and gas major said on Monday would boost its output by 370,000 barrels of oil equivalent per day (boed).
ARC is Shell's biggest acquisition since it bought gas giant BG in 2016 and comes after analysts and the company had forecast it needed an acquisition or exploration breakthrough because of its aging fields, media previously reported.
ARC's production lies near Shell's existing Canadian fields which feed into the LNG Canada plant, in which Shell holds a 40% share and whose liquefied natural gas can reach Asian buyers more quickly than most other North American LNG.
ARC has said it produced a record 374,000 boed on average in 2025, of which 59% was natural gas and 41% crude oil and liquids, while Shell's oil and gas production was 2.8 MM boed at the end of 2025.
20% PREMIUM TO ARC SHARES OVER LAST MONTH. London-listed Shell said in a statement it will pay ARC shareholders C$8.20 in cash and 0.40247 Shell shares for each share, or around 25% cash and 75% shares at a 20% premium to ARC's average share price over the last 30 days.
"Shell will take on approximately $2.8 billion in net debt and leases resulting in an enterprise value of approximately $16.4 billion. The equity value of $13.6 billion will be funded via $3.4 billion in cash and $10.2 billion in Shell shares," Shell said, referring to U.S. dollars.
Shell has bought back about a quarter of its stock in the last four years, or about $60 B - including $14 B in 2025, LSEG data shows.
The deal will give Shell 2 Bbbl of reserves and would generate double-digit returns and boost free cash flow per share from 2027 without affecting its investment budget of $20 B–$22 B through to 2028, it said.
SHELL INCREASES OUTPUT TARGETS. Shell's 'reserve life' - or how long its proven reserves can sustain current output levels - was equivalent to less than eight years of production as of 2025, from nine a year earlier, which was its lowest since 2021.
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The deal allows Shell to raise its compound annual production growth target for the decade from 1% to 4% compared to 2025. It plans to keep its liquids production of 1.4 MMbpd towards 2030 and beyond.
Shell shares were down 0.1% by 1243 GMT, against a broader index of European energy companies .SXEP trading up 0.4%.
The deal is dwarfed by U.S. major Chevron's $55-B purchase of Hess, which closed in 2025.
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