By Robb M. Stewart
Shell is set to expand its reach in Western Canada with a $13.6 billion deal to buy Arc Resources, a move expected to boost production at a time when Canada is looking to grow energy exports.
The energy companies said Monday they struck a definitive agreement that would see Shell offer 8.20 Canadian dollars (US$6) in cash and 0.40247 of a Shell share for each Arc share.
The price tag--split roughly 25% in cash and 75% in shares--represents total consideration of C$32.80 a share, a 27% premium to Arc's last closing price. Shell is additionally set take on about $2.8 billion in debt and leases, raising the enterprise value of the transaction to $16.4 billion.
Arc is focused on the Montney shale basin that stretches across the border between British Columbia and Alberta. Its assets, which last year produced 374,000 barrels of oil equivalent a day before royalty burdens, are located in the same region as Shell's existing Groundbirch asset in British Columbia and Gold Creek project in neighbouring Alberta. Last year, ARC reported production of 374,000 barrels of oil equivalent a day, before royalty burdens.
Shell said it expects the acquisition will result in annual production growth of 4% from 2025, whereas it had been targeting 1%, and said the deal would support its goal of sustaining liquids production of 1.4 million barrels daily toward 2030 and beyond. The buy would also add Arc's natural-gas reserves, which would support Shell's liquefied natural gas production in Canada.
The deal is slated to bring together Arc's more than 1.5 million net acres and Shell's 440,000 acres in the Montney region, and would add 2 billion barrels of oil-equivalent proved plus probable reserves as of the end of 2025.
"This establishes Canada as a heartland for Shell while furthering our strategy to deliver more value with less emissions," Shell Chief Executive Wael Sawan said. He said Arc is a high-quality, low-cost and top-quartile low-carbon-intensity producer.
Arc said the proposal would bring near-term liquidity for its shareholders through high-liquid Shell shares, and that it would provide upside potential with exposure to a global energy platform.
The planned takeover comes as Canada is positioning itself to face up to the Trump administration's protectionist trade policies. Prime Minister Mark Carney has pledged to boost exports to non-U.S. markets and to position the country as an energy superpower, and he is prioritizing the acceleration of big infrastructure and resource projects.
Shell's Groundbirch assets supply gas to the LNG Canada liquefaction operation, in which Shell owns a 40% stake, and to Canada's domestic gas market.
Ottawa last week approved a roughly $3 billion expansion of Enbridge's west-coast natural gas pipeline that will provide up to 300 million cubic feet a day of additional transportation capacity for domestic users and for export as liquefied natural gas.
Shell said the deal for Arc is expected to generate double-digit returns, bolster longer-term cash flow, and increase free cash flow per share from 2027 onward. The boards of both companies have unanimously approved the transaction, which is expected to close in the second half of the year, subject to approval from Arc's shareholders and regulators.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
04-27-26 0936ET
