Shell completes $9.5B sale of Permian business to ConocoPhillips

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• Royal Dutch Shell (RDS.A, RDS.B) says it completed the sale of its Permian Basin assets to ConocoPhillips (NYSE:COP) for $9.5B, which Shell says reflects its "focus on value over volumes as well as disciplined stewardship of capital."
• The agreement covers the sale of Shell's 225K net acres and 175K boe/day of existing production.
• Shell reiterates plans to use the proceeds to fund $7B in additional shareholder distributions, with the first tranche in the form of share buybacks of up to $1.5B to commence tomorrow.
• ConocoPhillips Chairman and CEO Ryan Lance says the deal "was justified on three key merits: It meets our rigorous cost of supply framework, we see a way to drive efficiencies from the assets, and the transaction makes our 10-year plan better."
• The sale follows Shell's plans to eliminate net carbon emissions by 2050 and invest more in renewable fuels.

Comments

[Flex68]

Disclosure: Math isn't my strong point.

But it would appear that this sale garnered Shell about 3.68% of their current Mkt Cap.

If they're using the first tranche to repurchase shares to the tune of $1.5B, with an average SP between A and B shares of around $41.50, that seems to be worth a bit less than to current investors.

(Although I don't disagree with the use of said funds, at this low SP)

But the remaining $7B might give investors about 5.5¢ per share in "additional shareholder distributions."

Yeah, weak math and all, I'll happily take both, lol.

[Keypounder52]

wish COP wud throw a few schedules at their dividend

[Keypounder52]

@Keypounder52 scheckles

[Nescience]

Do you mean shekels?

www.dictionary.com/...

[retired358]

I am still waiting for someone to show where buy backs are good for shareholders/improve TRS (which is the most critical indicator for shareholders/investors).

RDS has spent nearly 20 billion over the past few years on buy backs and share price/TRS is actually less than previously/historically since before buy backs started.

In my view, there are many other ways to spend the cash - which would do more for TRS.

[Flex68]

Is your TRS = TSR (total shareholder return) ?

Perhaps ignoring what IBM, and others, have done with share buybacks over the past umpteen years, Shell doesn't look so bad (and I don't believe that RDS's share repurchases even begin to constitute 'financial engineering' , as might be argued against IBM):

Sept. 30, 2021 938.00M
June 30, 2021 2.00M
March 31, 2021 279.00M
Dec. 31, 2020 184.00M
Sept. 30, 2020 -1.00M
June 30, 2020 233.00M
March 31, 2020 1.668B
Dec. 31, 2019 3.465B
Sept. 30, 2019 3.038B
June 30, 2019 2.148B
March 31, 2019 2.711B

They legitimately reduced the buybacks between March 2020 and current.

"In my view, there are many other ways to spend the cash"

So, what would you have done differently?

[martyr1777]

@retired358 @Flex68

The key to buybacks is if the company buys the shares then just holds them or worse distributes them to execs as bonuses then no it doesn't do anything for shareholders.

They have to buy the shares then retire them. I don't think most companies do this as I've never seen a notable share price change after all these recent buybacks. It saves the companies millions in dividend payments alone though.

[PeteMu]

@martyr1777

From the press release:

seekingalpha.com/...

"The aggregate maximum consideration for the purchase of A ordinary shares and/or B ordinary shares is $1.5 billion. All shares repurchased as part of this arrangement will be cancelled."

[abcde1]

Unreal to watch the socialist-run RDS liquidate itself to appease the green gods. How do they intend to make a buck 5 years from now, and who in their right mind would want to buy stock in this "thing", which is obviously no longer a for-profit enterprise?

[Torrid tungsten]

@abcde1
Its in the article. From renewables.

And no, I don't understand it either.

But what a schoolgirl says, goes.

[mxschumacher]

I'm happy to see buybacks ramping up at such a low valuation. Pension funds bound by ESG pressure are selling shell to itself.

[Toni Nikkanen]

@mxschumacher buybacks are good at this level, i agree. but why are they selling oil assets in one place while starting to develop new ones elsewhere, i don't know.

[martyr1777]

@Toni Nikkanen Because its more profitable in other areas is my bet. Lower cost of production.

[1HR1]

@Toni Nikkanen Their answer was: "quality over quantity ".