Shell to buy Canada's ARC in output-boosting US$16.4 billion deal

[LONDON] Shell has agreed to buy Canadian energy company ARC Resources in a deal valued at US$16.4 billion, including debt, which the British oil and gas major said on Monday would boost its output by 370,000 barrels of oil equivalent per day (boed).

Analysts and the company had forecast Shell needed an acquisition or exploration breakthrough to make up for an expected production shortage of 350,000 to 800,000 boed roughly by the middle of the next decade due to maturing fields unable to meet its output targets, Reuters previously reported.

ARC’s production lies near Shell’s existing Canadian fields which feed into the LNG Canada plant, in which Shell holds a 40 per cent share and whose liquefied natural gas can reach Asian buyers faster than most other North American LNG.

ARC has said it produced a record 374,000 boed on average in 2025, of which 59 per cent natural gas and 41 per cent crude oil and liquids.

Shell’s oil and gas production was 2.8 million boed at the end of 2025.

London-listed Shell said in a statement it will pay ARC shareholders C$8.20 (S$7.67) in cash and 0.40247 Shell shares for each share, or around 25 per cent cash and 75 per cent shares at a 20 per cent premium to ARC’s average share price over the last 30 days.

“Shell will take on approximately US$2.8 billion in net debt and leases resulting in an enterprise value of approximately US$16.4 billion. The equity value of US$13.6 billion will be funded via US$3.4 billion in cash and US$10.2 billion in Shell shares,” Shell said, referring to US dollars.

The deal will give Shell 2 billion barrels of reserves and would generate double-digit returns and boost free cash flow per share from 2027 without affecting its investment budget of US$20 billion to US$22 billion through to 2028, it said.

Shell’s ‘reserve life’ – or how long its proven reserves can sustain current output levels – was equivalent to less than eight years of production as of 2025, from nine a year earlier, which was its lowest since 2021.

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The deal allows Shell to raise its compound annual production growth target for the decade from 1 per cent to 4 per cent compared with 2025. It plans to keep its liquids production of 1.4 million barrels per day towards 2030 and beyond.

The deal is dwarfed by US major Chevron’s US$55 billion purchase of Hess, which closed in 2025. REUTERS