Shell will be sharpening key edges when it completes ARC acquisition – analyst Proactive uses images sourced from Shutterstock
Shell PLC’s (LSE:SHEL, NYSE:SHEL) proposed ARC transaction could sharpen two of the oil major’s most important strategic edges, that’s according to analysts at JP Morgan, who point to longer-life upstream liquids and global LNG leadership.
London-based analysts for the US bank, which has an ‘overweight’ rating on Shell, said the acquisition offers low-single-digit percentage free cash flow per share accretion to 2030 on a long-term Brent assumption of US$65 per barrel, with further upside from commodity prices and asset duration.
Specifically, analyst Matthew Lofting said ARC gives Shell a way to address part of the liquids gap identified at last year’s capital markets day, estimating that more than half of a previously flagged 350,000 barrels-per-day 2035 shortfall has now been covered.
That matters because it reduces pressure on Shell to pursue further large-scale M&A, the JPM analyst said, giving the group more room to focus on value-led organic growth.
“ARC presents an opportunity for Shell to advance two strategic cornerstones – 2030s upstream liquids longevity and global LNG leadership – in one transaction,” the broker added.
JPM also pointed to potential synergies from asset complementarity, Shell’s recent strategic “sprint” and possible integration value into LNG Canada II, arguing that the company could prove up the acquisition case over the next six to 12 months.