Shell Pays $1.9 Billion for Chesapeake Shale in U.S. Expansion

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, bought liquids-rich shale acreage in Texas from Chesapeake Energy Corp. (CHK) for $1.9 billion as part of a U.S. expansion drive.

The Anglo-Dutch company will acquire 618,000 net acres in the Permian Basin in West Texas that pump about 26,000 barrels of oil equivalent a day, according to a statement today. It expects to close the deal within 30 days.

“The acquisition provides both existing production and near-term growth potential from a proven resource, as well as promising opportunities for expansion,” Shell said.

Shell has been building the firepower to make acquisitions as record cash flow cuts debt to the lowest level in three years. Chief Executive Officer Peter Voser has signaled he’s on the hunt for purchases, noting in July that Shell sold $6 billion more in assets than it bought over the past 18 months.

Shell’s biggest purchases in recent years have been in North America, where natural-gas prices at the lowest in almost 10 years have spurred some companies to sell assets.

In 2010, Shell paid $4.7 billion for East Resources Inc., a U.S. shale driller, and in 2008 it forked out $5.8 billion on Duvernay Oil Corp., a Canadian gas producer.

Shell sold about $12 billion in assets and made about $6 billion in acquisitions in the 18 months to July. The company held about $17.3 billion in cash at the end of June, while net debt stood at $15.7 billion, the lowest since 2008.

The latest deal is part of a series of sales by Chesapeake of oil and gas fields and other assets that raised $6.9 billion to narrow a cash-flow shortfall.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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