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

By Shadia Nasralla and Stephanie Kelly

LONDON, April 27 (Reuters) - Shell SHEL.L has agreed to buy Canadian energy company ARC Resources ARX.TO in a $16.4 billion deal, paid for mostly with shares, the British firm said on Monday.

ARC will boost Shell's output of 2.8 million barrels of oil equivalent per day by 370,000 boed.

The acquisition is Shell's biggest since it bought gas giant BG in 2016. It was announced after analysts and the company had forecast Shell needed an acquisition or exploration breakthrough because of its ageing fields.

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

ARC's output is around 60% natural gas and 40% oil liquids.

SHELL TO PAY 20% PREMIUM

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

"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," Shell said, referring to U.S. dollars.

Shell has bought back about a quarter of its stock in the last four years, or about $60 billion, including $14 billion in 2025, LSEG data shows. It has flagged that its gearing, or debt to equity ratio, which stood at around 21% at the end of 2025, was already set to rise due to energy price fluctuations from the Iran war.

COMFORTABLE FINANCIAL FRAMEWORK

"We are very comfortable with what this (deal) does for our financial framework," Shell CEO Wael Sawan told reporters, reiterating Shell's plan to pay out 40% to 50% of its operating cash flow to shareholders.

The deal will give Shell 2 billion barrels of reserves and bring savings of around $250 million within a year of closing, without affecting its investment budget of $20 billion to $22 billion through to 2028, it said.

It also will bring Shell $1.5 billion in free cash flow per year.

SHELL INCREASES OUTPUT TARGETS

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

Shell shares were down 2.1% by 1452 GMT, against a 1.1% drop in a broader index of European energy companies .SXEP. Shares of ARC were up 22.2% on the Toronto Stock Exchange.

The deal is dwarfed by U.S. major Chevron's CVX.N $55 billion purchase of Hess, which closed in 2025.