TCL #64: Shell's In On Canadian Shale

The UAE has announced its departure from OPEC (Organization of the Petroleum Exporting Countries), an oil syndicate formed in 1960 to coordinate and unify petroleum prices (and keep them ideally high) among its member countries. The departure is due to the UAE's irritation with OPEC's production quotas, which have limited its ability to export more oil.

The move could have also been driven by advances in the battery and renewable energy sectors and the world (especially Asia) realizing how conflicts initiated by other entities could jeopardize their energy security. It probably is wise to get the oil out and get it off your hands before the current demand gets supplanted by further advances and adoption of non-oil energy sources.

Oil & Gas

1/ Shell is set to acquire the Canadian shale producer ARC Resources for $16.4 billion. This marks its largest acquisition in a decade. The deal is valued at 20% premium to ARC's recent share price. This move is expected to increase Shell's production growth rate from 1% to 4% annually and add 2 billion barrels to its reserves.

ARC primarily produces gas and condensate and will help Shell strengthen its position in Liquefied Natural Gas (LNG), potentially feeding the LNG Canada project, a joint venture focused on constructing LNG export terminal in British Columbia. In 2025, Shell provided around 16% of global LNG supplies, including production and trading.

2/ Abu Dhabi National Oil Company's (ADNOC) international investment arm, XRG, plans to invest tens of billions of dollars in the US to build a natural gas business. XRG was exploring 29 potential deals to create a vertically integrated global gas venture.

There are three drivers for this investment: desire to diversify commodity exposure, capitalize on increasing global demand for LNG, and US demand for gas to power data centers. XRG already has a presence in the US through its stake in the Rio Grande LNG plant in Texas.

3/ The French oil and gas giant, TotalEnergies, reported a 29% increase in total profits compared to the previous year, reaching $5.4 billion in the first quarter. The gas prices are expected to remain high through the rest of the year due to the blockades of the Strait. The company has had to halt 15% of its Middle East oil and gas production.

However, trading revenues remained strong and production outside the Gulf, especially from new projects in Brazil and Libya, helped alleviate losses. The French government has urged the company to cap prices at the pump, which TotalEnergies has complied with. Reportedly, the company made more than $1 billion in profit in March after buying all available crude from UAE and Oman.

EV

BYD reported a 55% drop in first-quarter net profit. Revenue was down 11.8% year-on-year but exceeded analyst forecasts. The decline in profit was due to fading government subsidies for EV purchases and increased competition from domestic rivals such as Geely, Leapmotor, Xiaomi, and Huawei. BYD maintains the largest market share in China for new energy vehicles at around 20%.

Oncology

Eli Lilly will acquire Cambridge and New York-based Ajax Therapeutics for up to $2.3 billion which includes an undisclosed upfront payment and subsequent payments based on clinical and regulatory milestones achieved. Ajax is focused on developing precision therapies for myeloproliferative neoplasms (MPNs), a group of blood cancers.

Ajax's lead asset, called AJ1-11095, is an investigational once-daily and first of its kind Type II JAK2 inhibitor. JAK inhibitors block Janus Kinase (JAK) enzymes. AJ1-11095 is currently in Phase 1 trial for myelofibrosis, a subtype of MPNs characterized by scarring in bone marrow. Eli, being cash-rich from GLP-1 drugs, has been on an acquisition spree of companies of various drug focuses:

• Kelonia Therapeutics (Cancer therapies)
• Centessa Therapeutics (Sleep disorder treatments)
• Ventyx Biosciences (Immunology/inflammation therapies)
• Verve Therapeutics (CRISPR gene-editing therapies with a cardiovascular focus).

Pharma

India's Sun Pharmaceutical Industries has agreed to acquire New Jersey based Organon & Co. in an all cash deal valued at $11.75 billion. Sun has historically focused on generics. The acquisition will help Sun to expand beyond lower-margin generics to higher value products. Organon is primarily focused developing women's health solutions through prescription therapies and medical devices. The deal is expected to close in early 2027.