Shell plc

Shell agreed to acquire ARC Resources, a Montney shale (British Columbia and Alberta) producer, paying CAD 8.20 cash plus 0.40247 Shell shares per ARC share, an equity value of about US$13.6 billion (US$3.4 billion cash, US$10.2 billion in about 228 million new Shell shares) and about US$2.8 billion of net debt and leases taken on. It adds about 370 kboe/d, extends Shell's existing Groundbirch/Gold Creek Canadian position, and is expected to be accretive to free cash flow per share from 2027, with close in the second half of 2026 subject to ARC shareholder, court and regulatory approvals. Existing shareholders would be diluted by the new share issue; distribution policy (40-50% of operating cash flow) and the 2027-28 cash capex range of $20-22 billion are unchanged, and the next buyback tranche is to be announced with Q1 results.

business combination

Shell agreed to sell its entire Permian business to ConocoPhillips for $9.5 billion in cash, effective July 1, 2021, with closing expected in Q4 2021 subject to regulatory approvals. Shell says $7 billion of the proceeds will fund additional shareholder distributions after closing, on top of its 20-30% of operating cash flow distributions, with the rest going to strengthening the balance sheet; it expects an after-tax gain of $2.4 to $2.6 billion. The business has about 225k net acres and about 175 thousand barrels of oil equivalent a day of production.

asset acquisition disposition

Shell announced the next buyback tranche, up to $1.0 billion to April 27, 2020, smaller than the previous $2.75 billion tranche. The previous tranche finished January 22, 2020, and total repurchases since July 2018 are 484,534,678 shares for $14.75 billion; the company still intends to buy back at least $25 billion, but the pace depends on macro conditions and further debt reduction. All shares bought will be cancelled.

security holder rights change

Shell reported Q3 2019 earnings of $4.8 billion (current cost of supplies basis, excluding identified items), down from $5.6 billion a year earlier, citing lower oil, LNG and gas prices and weaker refining and chemicals margins, partly offset by stronger trading results. The dividend was held at $0.47 per share and gearing was 27.9% (23.5% on the old lease-accounting basis), still reflecting the IFRS 16 change. Shell launched a further buyback tranche of up to $2.75 billion to January 27, 2020 (total bought back $12 billion); the CEO says the $25 billion buyback intention is unchanged but weak conditions create uncertainty about the pace of reaching 25% gearing and finishing the buyback within 2020. The Danish Underground Consortium sale ($1.9 billion) and SASREF sale ($631 million) completed, resolving those pending items.

regulatory community update

Shell reported full-year 2018 earnings of $21.4 billion (current cost of supplies basis, excluding one-off items), up from $15.8 billion, with Q4 at $5.7 billion; gearing fell to 20.3% and the dividend stayed at $0.47 per quarter ($1.88 for the year). The CEO says the $30 billion divestment programme is complete, ending that open thread, and the second buyback tranche finished in January 2019 (83.5 million shares for $2.5 billion), with a third tranche of up to $2.5 billion launched to April 29, 2019. Q4 also saw the sale of Irish Upstream interests (Corrib) and Draugen/Gjøa completed, and wells opened at the Prelude floating LNG facility (67.5%).

regulatory community update

Shell reported Q3 2018 earnings of $5.6 billion (current cost of supplies basis, excluding one-off items), up from $4.1 billion a year earlier, with gearing at 23.1% and the dividend held at $0.47 per share. The first buyback tranche finished in October (almost 61 million A shares for $2.0 billion), and a second tranche of up to $2.5 billion was launched, running to January 28, 2019. LNG Canada (Shell 40%) reached a final investment decision in October, ending the long-delayed FID thread; Shell also agreed to sell its 36.8% Danish Underground Consortium interest to Norwegian Energy Company ASA for $1.9 billion and completed the sale of its Argentina Downstream business to Raízen.

regulatory community update

Shell reported Q2 2018 earnings of $4.7 billion (current cost of supplies basis, excluding one-off items), up from $3.6 billion a year earlier, with gearing at 23.6% (on a revised net debt definition) and the dividend held at $0.47 per share. Shell starts a share buyback programme of at least $25 billion over 2018-2020, subject to further debt reduction and oil price conditions, with a first tranche of up to $2 billion over 3 months; this is the first buyback since the BG deal and follows the end of the scrip dividend. The Canadian Natural Resources shares were sold for $3,307 million and Bongkot (Thailand) and the 15% of Malaysia LNG Tiga were sold, completing those pending sales; Shell's LNG Canada interest is now 40% after dilution to Petronas, and Draugen/Gjøa in Norway were agreed to be sold to OKEA for $556 million.

regulatory community update

Shell agreed to sell its entire stake in Canadian Natural Resources (97,560,975 shares) through underwriters, for about $3.3 billion before tax, expected to complete May 9, 2018. The filing says the proceeds will go toward reducing net debt, continuing the debt-reduction and divestment effort.

asset acquisition disposition

Shell reported full-year 2017 earnings of $15.8 billion on a current cost of supplies basis excluding one-off items (vs $7.2 billion in 2016), with Q4 at $4.3 billion despite a $2,014 million non-cash charge from US tax reform. Gearing ended at 24.8% (28.0% at end 2016), net debt fell $8 billion, and the scrip dividend programme was cancelled from Q4 2017, ending that in-use programme; the dividend stays at $0.47 per share with the same level expected for Q1 2018. Divestments completed include Woodside shares ($2,635 million), Comgás ($363 million), the UK North Sea package and Gabon; the Bongkot sale was announced again in January 2018, and the Danish refinery (Dansk Shell) sale was cancelled.

regulatory community update

Shell reported first-quarter 2017 earnings of $3.4 billion on a current cost of supplies basis (vs $0.8 billion a year earlier); excluding one-off items they were $3.8 billion, up 142%, driven by Upstream and Chemicals. Operating cash flow was $9.5 billion and free cash flow $5.2 billion, which the CEO says covered the cash dividend for the third quarter in a row; the dividend was held at $0.47 per share and gearing was 27.2%. The CEO says over $20 billion of divestments are completed or announced, including the UK North Sea assets, Canadian oil sands, Gabon onshore, SADAF and Vivo Energy (completed April); the Kaikias project received a final investment decision.

regulatory community update

Shell reported fourth-quarter 2016 earnings of $1.0 billion on a current cost of supplies basis (vs $1.8 billion), and full-year 2016 earnings of $3.5 billion vs $3.8 billion in 2015; excluding one-off items the full year was $7.2 billion vs $11.4 billion. The dividend was held at $0.47 per share ($1.88 for the year), gearing ended 2016 at 28.0% (14.0% in 2015), and the CEO says about $15 billion of the $30 billion divestment programme is completed, announced or in progress. January agreements include selling UK North Sea assets for up to $3.8 billion (completion expected second half 2017) and the Bongkot stake in Thailand for $900 million; Deep Basin/Gundy and Brutus sales completed. A new thread: a Nigerian court order attached the OPL 245 licence pending a corruption investigation, which Shell's Nigerian unit is applying to discharge.

regulatory community update

Shell reported third-quarter 2016 earnings of $1.4 billion on a current cost of supplies basis, against a $6.1 billion loss a year earlier; excluding one-off items they were $2.8 billion, up 18%. The filing credits higher production from BG assets and lower operating costs, partly offset by lower prices and higher depreciation. The dividend was held at $0.47 per share, gearing was 29.2%, and the CEO says the BG integration is essentially done ahead of plan, 2016 capital investment will be about $29 billion and 2017 about $25 billion, with 16 asset sales in progress under a $30 billion divestment programme. Agreed sales included Canada's Deep Basin and Gundy acreage (about $0.75 billion plus shares) and the Brutus platform ($425 million), and the Stones field began production.

regulatory community update

Shell reported second-quarter 2016 earnings of $0.2 billion on a current cost of supplies basis (vs $3.4 billion a year earlier); excluding one-off items they were $1.0 billion, down 72%. The filing attributes the fall to lower oil, gas and LNG prices, higher depreciation from the BG acquisition, weaker refining and higher tax, partly offset by more production from BG assets. The dividend was held at $0.47 per share, gearing rose to 28.1% (from 26.1% in Q1), and the Maui pipeline sale to First State Investments (about $0.2 billion) completed, resolving that pending item. Shell also delayed final investment decisions on LNG Canada and Lake Charles LNG, extending the earlier LNG Canada postponement, and took a final investment decision on a Pennsylvania petrochemical complex.

regulatory community update

Shell completed its acquisition of BG Group on 15 February 2016, resolving the open BG offer thread, for $54,034 million: $19,036 million cash plus 1,523.8 million new shares valued at $34,050 million. First-quarter 2016 earnings were $0.8 billion (current cost of supplies basis) against $4.8 billion a year earlier; excluding one-off items they were $1.6 billion, down 58%. Gearing rose to 26.1% from 12.4% a year earlier, which the filing says mainly reflects the BG acquisition, and the dividend was held at $0.47 per share. The CEO says 2016 capital investment is trending toward $30 billion versus earlier guidance of $33 billion.

regulatory community update

Shell reported fourth-quarter 2015 earnings of $1.8 billion (current cost of supplies basis), down from $4.2 billion, and full-year 2015 earnings of $3.8 billion against $19.0 billion in 2014; excluding one-off items the full year was $10.7 billion, down 53%. The dividend was held at $0.47 per share ($1.88 for the year, expected to be at least that in 2016), and gearing rose to 14.0% from 12.2%. The CEO says the BG completion is expected within weeks, about 10,000 jobs will be cut across 2015-16, and Shell has exited the Bab sour gas project in Abu Dhabi and postponed decisions on LNG Canada and Bonga South West. This moves the earlier LNG Canada FEED and Bonga plans into postponement.

regulatory community update

Shell reported a third-quarter 2015 loss of $6.1 billion (current cost of supplies basis) against a $5.3 billion gain a year earlier, with $7.9 billion of one-off items; excluding them earnings were $1.8 billion, down 70%. The filing links the charges to a lower oil and gas price outlook and decisions to stop Carmon Creek in Canada (its 418 million barrels of proved bitumen reserves to be de-booked) and to halt exploration offshore Alaska. The dividend was held at $0.47 per share, gearing was 12.7%, and the CEO says the BG deal remains on track to complete in early 2016. Shell also agreed to sell 33.24% of Showa Shell to Idemitsu for about $1.4 billion (expected 2016) and handed its Malaysia LNG Dua interest to PETRONAS; Bonga Phase 3 began production in October.

regulatory community update

Shell reported first-quarter 2015 earnings of $4.8 billion (current cost of supplies basis), but excluding one-off items they were $3.2 billion, down 56% from $7.3 billion, with the filing citing lower oil and gas prices in Upstream. Shell says it agreed in April the terms of a recommended cash and share offer for all of BG Group plc, a new major transaction, and cut expected 2015 organic capital investment to $33 billion or less. The dividend was held at $0.47 per share, and Shell sold its Nigerian stakes in OML 18 (~$0.7 billion) and OML 29 (~$1.7 billion).

regulatory community update

Shell reported third-quarter 2014 earnings of $5.3 billion (current cost of supplies basis), up from $4.2 billion a year earlier; excluding one-off items they were $5.8 billion, up 31%. Asset sales this year total $11.6 billion, with exits from Pinedale (sold to Ultra Petroleum) and Haynesville (agreed sale for $1.2 billion to Vine Oil & Gas and Blackstone, subject to closing) which the CEO says complete the major North America shale sales programme; the Australian downstream sale was completed in the quarter. The dividend stayed at $0.47 per share (up 4% on a year ago), and the CEO cited the recent fall in oil prices as part of industry volatility.

regulatory community update

Shell reported second-quarter 2014 earnings of $5.1 billion (current cost of supplies basis), up from $2.4 billion a year earlier; excluding one-off items they were $6.1 billion, up 33%. It continued the asset-sale programme announced in Q1: the BC-10 sale in Brazil to Qatar Petroleum International completed for $1.2 billion, a Woodside share sell-down cut Shell's stake from 23% to about 14% for $3 billion, and its Wheatstone LNG interests went to Kuwait Foreign Petroleum Exploration Company for $1.5 billion. Shell also cancelled its scrip dividend programme, kept the dividend at $0.47 per share (up 4% on a year ago), and expects $7-8 billion of buybacks across 2014-15.

regulatory community update

Shell reported first-quarter 2014 results: earnings of $4.5 billion on a current cost of supplies basis, down from $8.0 billion a year earlier, after a $2.9 billion net charge mainly from refinery impairments in Asia and Europe. Excluding such one-off items earnings were $7.3 billion (down 3%), and the quarterly dividend was raised 4% to $0.47 per share. Shell also set out $15 billion of divestments for 2014-15, including a 23% stake in Brazil's BC-10 to Qatar Petroleum International (~$1 billion), Australian downstream businesses to Vitol (~$2.6 billion) and Italian retail and logistics to Kuwait Petroleum International; these sales were still subject to approval.

regulatory community update