Royal Dutch Shell on Monday sold its oil and gas production in the Permian Basin, the biggest American oil field, to ConocoPhillips for $9.5 billion in cash.
The deal marks a turning point for Shell, which had put considerable effort into developing the 225,000-acre field since buying acreage from Chesapeake Energy nine years ago, expanding its production to about 200,000 barrels a day.
The sale is the latest sign that Shell, like other European oil companies, is under pressure to sell off oil and gas production and move toward producing cleaner energy in response to growing concerns about climate change among investors and the general public.
Shell is retreating from the Permian as American shale oil production is recovering. The field yielded 4.7 million barrels a day in August — more than 40% of total U.S. oil output and a nearly 400,000-barrel-a-day increase from January. Rising oil prices have enticed crews to return to the fields, where they use hydraulic fracturing — commonly known as fracking — to blast open shale rocks and force oil out of the ground.
A wave of acquisitions in the Permian began last year with the onset of the coronavirus pandemic as companies sought to cut costs. The scale of the Shell deal is similar to Conoco’s acquisition of Concho Resources for $9.7 billion in October, a deal that made Conoco a major player in the Permian, which straddles Texas and New Mexico. In April, Pioneer Natural Resources bought DoublePoint Energy for $6.4 billion.
With the acquisition of Shell’s acreage, Conoco consolidates its position as a top-tier Permian producer along with Pioneer, Occidental Petroleum, Exxon Mobil and Chevron.
Shell’s sale of its West Texas Permian holdings, which provided an estimated 6% of the company’s global oil and gas production last year, had been expected for months. Shell recently sold its stakes in offshore oil and gas fields in Malaysia and the Philippines.
Its American operations include offshore production in the Gulf of Mexico along with refineries.
Shell has been talking about cutting emissions since 2017, and it has accelerated its shift to cleaner fuels over the past two years, though not enough to satisfy many environmentalists.
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