‘Win-win’ deal; How a Canadian buyout is rescuing Shell’s dwindling oil reserves: expert

John Stephenson, oil & gas analyst at Granite Point Research, joins BNN Bloomberg to discuss Shell's acquisition of Arc Resources.

Shell’s acquisition of ARC Resources is a “win-win” deal that rescues the energy giant from running out of supply, while also significantly growing a Canadian company, says an oil expert.

The energy giant signed a deal to acquire Alberta-based oil and natural gas producer ARC Resources Ltd. in a $22 billion deal, including assumed debt.

With its reserve life index below 10 years, Shell is using the acquisition to move away from low-profit green energy and secure decades of profitable Canadian oil and gas, says John Stevenson, an oil and gas analyst at Granite Point Research.

“It had to acquire something or find something big,” Stevenson told BNN Bloomberg.

“If they just kept producing at that same rate, without any new discoveries, they would be out essentially in 5.3 years.”

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Stevenson says ARC was a discounted target and in a weak position because its Attachie project hadn’t performed as well as it hoped.

The deal secures Shell’s 40 per cent stake in LNG Canada while tapping into highly profitable liquids that drive 70 per cent of ARC’s revenue.

“That’s really helpful for their economics. It boosts their production growth from a compound annual growth rate of roughly one per cent to around four,” says Stevenson.

“All of these things are pluses for Shell. And for ARC, well, they get nicely rewarded. Their shareholders get rewarded,” he says.

The deal, valued at $32.80 per share based on April 24 data, gives ARC investors $8.20 in cash and 0.40247 of a Shell share for each of their shares.

‘They’re going to grow it’

While it is a shame to lose a Canadian producer, the deal will significantly help the company, he says.

“Oh, they’re going to grow it,” says Stevenson.

“They’re going to try and get another 100,000 barrels of oil equivalent a day.”

ARC Resources produced a record 374,336 barrels of oil equivalent per day (boe/d) in 2025.

With Shell’s nearly 2.8 million boe/d production, the deal adds an immediate production increase of roughly 14 to 15 per cent, he says.

This will ultimately bring more money into Canada regardless of its foreign ownership, says Alexander McDonald, portfolio manager at Focus wealth management.

“We do want to encourage foreign capital to come in here and invest in our infrastructure so that all Canadians can benefit from it in the form of taxation,” says McDonald, stressing that ARC Resources is a public company with shareholders all around the world.

“In terms of protecting protectionism when it comes to foreign takeovers like that, I don’t think that’s a route we should go down.”

Canada becoming increasingly attractive

The reason Canada is so attractive as an oil resource is because it has very long reserve lives, says Stevenson.

While the U.S. is the largest producer in the world of oil and gas, a lot of its shale is hitting peak production and is starting to slowly decline.

“Whereas Canada, even though it produces significantly less than the U.S., still has massive reserves,” says Stevenson.

“And so I think you’re going to see more and more activity directed in Canada, as it should.”

After the recent attack on Qatar’s Ras Laffan site which removed approximately 17 per cent of its LNG capacity, projects like LNG Canada are seen as stable alternatives which offer a direct, secure route to Asia to meet demand amid severe global price spikes, he says.

With the war in Iran, 20 per cent of the world’s oil and gas is blocked. Even if a permanent ceasefire were reached tomorrow, the dual blockade by the United States and Iran has created lasting geopolitical uncertainty for shipping through the Strait of Hormuz, says Stevenson.

“It makes it more imperative to find oil elsewhere, and the safer the geography, the better,” he says about Canadian oil.

“We’re not going back to $57 oil. We might be going back to $85 oil, but we’re not going back to $57 oil.”