Shell to buy ARC Resources in deal valued at $22B including debt

Oil giant Shell has signed a $22-billion deal to acquire ARC Resources Ltd., bringing together the lead partner in Canada’s first operating liquefied natural gas project with a major producer in one of the continent’s most profitable shale regions.

Wael Sawan, chief executive of the U.K.-based global energy heavyweight, said Monday that the transaction “establishes Canada as a heartland for Shell,” which had years ago divested its once hefty footprint in the oilsands.

“We are accessing uniquely positioned assets and welcoming colleagues that bring deep expertise which, combined with Shell’s strong basin level performance, provides a compelling proposition for shareholders.”

ARC Resources is focused on the Montney, a shale formation that stretches through parts of northeastern British Columbia and northwestern Alberta.

“Through this transaction, we will realize this tremendous value and become part of a dynamic global energy leader capable of realizing the full potential of our business and delivering on Canada’s exciting energy future,” ARC chief executive Terry Anderson said in a statement.

Deal reinforces value of the Montney

“It reinforces the fact that the Montney is a world-class resource play,” Tom Pavic, president of Sayer Energy Advisors in Calgary, said of the proposed takeover.

“I think you would probably see some more [merger and acquisition] activity in the Montney, for sure.”

WATCH | Energy minister says Canada could be ‘one of the largest suppliers of LNG in the world’:

Energy minister says Canada could be ‘one of the largest suppliers of LNG in the world’

Appearing at the Standing Committee for Natural Resources Thursday, Energy Minister Tim Hodgson said if Canada delivers on its liquified natural gas targets ‘as we hope, proponents will ultimately increase our production to as much as 100 million tonnes per annum.’

Under the proposal, ARC shareholders will receive 0.40247 of a Shell share and $8.20 in cash in exchange for each ARC share.

The offer is valued at $32.80 per ARC share, based on the closing price for Shell shares and exchange rates on April 24 when ARC shares closed at $25.77.

All told, the companies value the deal at $22 billion, including assumed debt.

LNG Canada plant capacity could be doubled

Shell and four Asian companies own the LNG Canada plant in Kitimat, B.C., which began operations last summer. There, natural gas is piped from fields in the Montney and elsewhere in western Canada and then chilled into a liquid state, enabling it to be exported across the Pacific in specialized tankers.

The consortium is contemplating doubling the plant’s capacity through a second phase, and Pavic said Monday’s deal signals a positive final investment decision is likely.

For its part, ARC is active in the LNG industry…