Are 60/40 portfolios still diversified as correlations rise?
Michael White, CFA, Portfolio Manager, Multi-Strategy
What does the Shell-ARC deal mean for Canada's energy sector?
Tom Savage, CFA - Portfolio Manager, Arbitrage
Shell PLC has agreed to acquire ARC Resources at a 27% premium, valuing the company at roughly CAD $18 billion. It ranks among the largest M&A transactions in Canada over the past decade, alongside Teck Resources and Shaw Communications.
ARC Resources is one of the largest natural gas producers in the Montney Basin, which straddles northeastern B.C. and Alberta. Shell already owns 40% of LNG Canada, the export terminal in Kitimat. Acquiring ARC gives Shell direct control of the upstream gas supply that feeds that terminal. It's a vertical integration play with a clear rationale. Shell has operated in Canada for over 100 years, and its CEO described the transaction as establishing Canada as "a heartland for Shell", which is a signal of long-term strategic commitment.
With Middle Eastern supply less reliable than it was, global energy buyers are diversifying. Canadian liquefied natural gas (LNG) stable jurisdiction, established infrastructure and growing export capacity, is an obvious destination. This deal reflects that shift and could attract other international buyers looking at similar Canadian assets. It is also worth noting that LNG Canada Phase 2 is the first project on Prime Minister Carney's list for the newly created Major Projects Office, a federal initiative designed to fast-track nation-building infrastructure. That level of political prioritization adds another layer of support to the asset Shell is doubling down on.
Each ARC Resources share is priced at CAD $8.20 cash plus 0.40247 Shell PLC shares. The current spread implies roughly an 8% return to an assumed end-of-September close. The main regulatory hurdle is Investment Canada Act approval. Shell's established presence in Canada and recent review timelines (Teck being the relevant comparable) suggest this is unlikely to be a material obstacle.
Other Montney producers such as Tourmaline Oil Corp., Whitecap Resources, and Ovintiv hold comparable assets. Whether this transaction prompts a re-rating of the group or signals further acquisition interest is worth monitoring. At minimum, it puts a credible public valuation on Montney natural gas in the current environment.
Michael White, CFA, Portfolio Manager, Multi-Strategy
Rob Poole, CFA, Co-Head Equity Strategies, Head of Fundamental Equity Research
Phil Mesman, CFA, Portfolio Manager, Co-Head Fixed Income
DISCLOSURE
All data sourced from Picton Mahoney Asset Management Research unless otherwise cited.
This material has been provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable, however, the accuracy and/or completeness of the information is not guaranteed by PICTON Investments, nor does PICTON Investments assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
This material contains “forward-looking information” that is not purely historical in nature. These forward-looking statements are based upon the reasonable beliefs, expectations, estimates and projections of PICTON Investments as of the date they are made. PICTON Investments assumes no duty, and does not undertake, to update any forward-looking statement. Forward-looking statements are not guarantees of future performance, are subject to numerous assumptions, and involve inherent risks and uncertainties about general economic factors which change over time. There is no guarantee that any forward-looking statements will come to pass. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement made.
Any review, re-transmission, dissemination or other use of this information by persons or entities other than the intended recipient is prohibited.
Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns.
© 2026 Picton Mahoney Asset Management. All rights reserved.