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Shell Looks to Unload Permian Basin Assets

By Rich Duprey – Jun 14, 2021 at 11:51AM

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Activist pressure and a court order have the oil giant exploring alternatives.

The Permian Basin has been a massive growth driver for the oil and gas industry, but Royal Dutch Shell (RDS.A) (RDS.B) is joining a number of its peers in looking to exit its U.S. shale assets.

A Reuters report on Sunday indicates the energy giant could be eyeing a sale of its Permian portfolio in a bid to lower its carbon emissions, but the shale position represented some 6% of Shell's total production last year. It's estimated the sale could raise as much as $10 billion.

Oil well pumps at sunset

Image source: Getty Images.

Shell suffered a blow last month when a Dutch court ruled the company had to expedite its carbon emission reduction plan, requiring it to cut greenhouse gases by 45% by 2030. Shell had intended to reduce emissions by 20% over the next decade. 

Although Shell will appeal the ruling, reducing its oil and gas footprint could help it achieve the goal and relieve some of the pressure it and other oil and gas companies are feeling due to activists.

ExxonMobil (XOM -2.74%), for example, saw three activists elected to its board of directors, and it is looking to sell some $1 billion worth of assets in the North Sea to raise cash, though it intends to invest more in other oil and gas sources, such as in Guyana, Brazil, and the Permian. 

The push to have the oil giants embrace green energy is causing oil prices to spike, however, as spending on oil projects suffers a broad-based decline. U.S. crude recently hit $70 per barrel, more than twice the price during the depths of the pandemic-induced recession. 

It could make assets like those in the Permian Basin more valuable. While that could allow Royal Dutch Shell to fetch a higher price in a sale, it might sap future profits.

Rich Duprey owns shares of ExxonMobil. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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