-- (Adds analyst comment in the 7th paragraph; updates shares.)
ARC Resources (ARX.TO) agreed Monday to be acquired by Shell plc (SHEL) for C$22 billion, including debt, as the global oil and gas producer looks to add exposure to the prolific Montney shale-gas in northeastern British Columbia.
Shell is offering C$32.80 per ARC share, a 27% premium to its Friday closing price on the Toronto Stock Exchange. The amount will be paid 75% with Shell shares and 25% in cash.
The agreement will see Shell add ARC's 374,336 barrels of oil equivalent per day (boe/d)of natural gas and natural-gas liquids production from the Montney field at the end of last year, which is expected to grow to between 405,000 and 420,000 boe/d this year. It also adds supply for the LNG Canada facility on northern British Columbia's Pacific coast, which is 40% owned by Shell.
"ARC is a high-quality, low-cost and top quartile low carbon intensity producer operating in the Montney shale basin that complements our existing footprint in Canada and strengthens our resource base for decades to come. 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," Shell chief executive Wael Sawan said in a release.
ARC holds 1.5-million acres of lands in the Montney region, which will add to Shell's holdings of 440,000 acres in the field. It also brings adds around two-billion boe/d of reserves.
The acquisition re-establishes Canada as a major center for the global producer, which has been retreating from the country after selling off most of its oil-sands operations to Canadian Natural Resources (CNQ.TO) in 2017 and completed its exit from the oil sands in 2025 by selling its remaining oil-sands interest to the Canadian producer. It still operates an oil-sands upgrader, refinery and carbon-capture facility near Edmonton, Alberta, as well as a refinery in Sarnia, Ontario, and owns 1,400 retail gasoline stations in Canada.
"We note that while ARC is a strong operator with a vast undeveloped inventory (which is likely to be accelerated given acquirer's access to global markets) and a top-tier resource base, this deal clearly signals a compounding benefit to the Canadian gas market with global integrated names showing an appetite for Canadian resources, which we haven't seen in a while," National Bank Financial analyst Travis Wood wrote.
ARC said Shell approached the company in March and its board formed a special committee to assess the offer, which it determined to be fair and in the best interest of shareholders.
"The ARC Board unanimously recommends this strategic transaction to our shareholders," board chair Hal Kvisle said in a statement. "This agreement delivers compelling value for our shareholders and brings together two companies with shared commitments to safety, operational excellence and care for communities and people - strengthening our ability to deliver resilient, long-term value creation for many years to come."
The sale is expected to close in the second half of this year.
ARC shares were last seen up $5.52 to $31.29 on the Toronto Stock Exchange.
Price: $31.25, Change: $+5.48, Percent Change: +21.27%