Shell PLC (NYSE:SHEL) shares are trading lower Monday after the company said it agreed to acquire ARC Resources Ltd., a Montney-focused producer in British Columbia and Alberta, in a cash-and-stock transaction.

The deal carries an equity value of about $13.6 billion and an enterprise value of roughly $16.4 billion, including $2.8 billion in net debt and leases.

Under the terms, ARC shareholders will receive 8.20 Canadian dollars in cash and 0.40247 Shell shares for each ARC share, implying a total value of 32.80 Canadian dollars per share. That represents a 20% premium to ARC’s 30-day volume-weighted average price.

Shell said it will fund the purchase with $3.4 billion in cash and $10.2 billion in shares, issuing about 228 million shares. Both boards have unanimously approved the deal, which is expected to close in the second half of 2026, subject to regulatory and shareholder approvals.

Shell reported $30.2 billion in cash and cash equivalents as of Dec. 31, 2025.

Strategic Rationale

The acquisition adds about 370,000 barrels of oil equivalent per day and is expected to lift Shell’s production growth rate to 4% through 2030, compared with 2025 levels. It also expands Shell’s position in Canada’s Montney basin, combining ARC’s more than 1.5 million net acres with Shell’s roughly 440,000 acres.

“ARC is a high-quality, low-cost and top quartile low carbon intensity producer operating in the Montney shale basin that complements our existing footprint in Canada and strengthens our resource base for decades to come,” Chief Executive Officer Wael Sawan said. “This establishes Canada as a heartland for Shell while furthering our strategy to deliver more value with less emissions.”

ARC President and CEO Terry Anderson said, “This combination is a great opportunity for ARC to realize value for our shareholders and continue to benefit from Shell’s success in the future.”

Financial Impact

Shell said the transaction is expected to generate double-digit returns and be accretive to free cash flow per share from 2027. It also expects about $250 million in annual synergies within a year of closing.

The deal adds about 2 billion barrels of oil equivalent in proved and probable reserves. ARC’s gas assets are expected to support Shell’s liquefied natural gas growth, including its stake in LNG Canada.

Shell said its capital spending outlook remains unchanged, with projected cash capital expenditures of $20 billion to $22 billion for 2027 and 2028. Its shareholder distribution policy also remains intact, targeting 40% to 50% of cash flow from operations through dividends and buybacks.

SHEL Price Action: Shell shares were down 2.64% at $86.78 at the time of publication on Monday, according to Benzinga Pro data.