British energy giant Shell announced Monday it has reached an agreement to acquire Canadian oil and gas company ARC Resources in a massive $16.4 billion transaction that includes existing debt obligations.
The London-based oil major said the purchase will increase its daily production capacity by 370,000 barrels of oil equivalent, addressing a critical need for expanded output as the company faces potential production gaps.
Industry experts and Shell executives had previously identified the need for major acquisitions or significant exploration successes to counter anticipated production shortfalls ranging from 350,000 to 800,000 barrels of oil equivalent daily by the mid-2030s, as existing oil fields mature and struggle to meet production goals.
Under the transaction terms, ARC shareholders will receive C$8.20 in cash plus 0.40247 Shell shares for each share they own, representing roughly 25% cash and 75% stock at a 20% premium above ARC’s 30-day average trading price.
“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,” the company stated in its announcement.
The acquisition will provide Shell with 2 billion barrels in additional reserves and is projected to deliver double-digit returns while enhancing free cash flow per share beginning in 2027, all without impacting the company’s planned investment spending of $20 billion to $22 billion through 2028.
Shell’s reserve life indicator, which measures how long proven reserves can support current production rates, dropped to less than eight years as of 2025, down from nine years previously and marking the company’s lowest level since 2021.
