Shell’s Gulf of Mexico Stake Expansion: A Strategic Move to Boost Oil Production and Cash Flow

Shell’s recent acquisition of a larger working interest in the Ursa Tension-Leg Platform (TLP) in the Gulf of Mexico marks a significant step in its upstream strategy. By increasing its ownership stake to 61.35%, Shell strengthens its position in one of the most prolific oil-producing regions in the U.S., while securing additional revenue streams through acquired royalty interests. This move aligns with the company’s focus on high-value, carbon-competitive assets, offering investors exposure to stable cash flows and potential upside from future development.

The Deal Details
In early 2025, Shell finalized the purchase of ConocoPhillips’ 15.96% stake in the Ursa TLP for $735 million. The transaction, completed by May, also included ConocoPhillips’ 15.96% interest in the Ursa Oil Pipeline Company LLC, raising Shell’s pipeline ownership to 57.20%. Additionally, Shell acquired a 1% working interest in the adjacent Europa prospect and a 3.5% Overriding Royalty Interest (ORRI) in the Ursa field. These terms position Shell as the majority operator of the Ursa TLP, alongside partners BP (22.69%) and ECP GOM III (15.96%).

The Ursa field, operational since 1999, has produced over 800 million barrels of oil equivalent (MMboe) to date. In 2024 alone, the acquired stake contributed an average of 8,000 barrels of oil equivalent per day (boe/d), with the ORRI ensuring Shell benefits from 3.5% of all Ursa field production, regardless of ownership.

Strategic Rationale and Production Outlook
The Gulf of Mexico remains a cornerstone of Shell’s upstream portfolio. As the region’s largest producer, Shell leverages its extensive infrastructure, including the Ursa TLP, to minimize costs and maximize returns. The acquisition of ConocoPhillips’ stake reduces operational complexity by centralizing control, while the Europa prospect offers exploration upside.

The Ursa platform’s location in the Mars Basin—a prolific hydrocarbon-rich area—ensures access to proven reserves. With production averaging 8,000 boe/d from the acquired stake, the deal adds approximately 64 million boe annually to Shell’s output, assuming steady production through 2025.

Financial Implications
At $735 million, the purchase price represents a premium to the Ursa field’s current production value but reflects its long-term potential. Analysts estimate the Ursa field has at least 10 years of remaining life, with the ORRI generating roughly $18 million annually at current oil prices ($80/bbl). Combined with Shell’s 61.35% working interest, the deal could add ~$500 million in annual EBITDA by 2026, assuming stable production and oil prices.

Shell’s Gulf of Mexico operations already account for ~15% of its global oil production, and this acquisition reinforces its dominance. The region’s shallow-water fields are particularly attractive due to low operating costs and short development cycles compared to international projects.

Risk Considerations and Market Dynamics
While the Gulf of Mexico is a mature basin, risks include declining production rates and regulatory hurdles. However, Shell’s focus on cost optimization and its partnership with BP—a seasoned Gulf operator—mitigate these risks. Additionally, the U.S. government’s push for energy independence supports Gulf development, with permits for new projects accelerating in recent years.

Conclusion: A Prudent Investment in a Core Asset
Shell’s Ursa stake expansion is a disciplined move to bolster its liquids production and cash flow. The $735 million outlay is justified by the asset’s proven reserves, cost-efficient operations, and the ORRI’s revenue tailwind. With the Ursa field producing at 8,000 boe/d and the Europa prospect offering exploration upside, this deal aligns with Shell’s strategy to prioritize high-return, low-carbon-intensity projects.

For investors, the Gulf of Mexico’s stability—accounting for 17% of U.S. oil output in 2024—provides a hedge against global supply disruptions. Shell’s growing control over Ursa, combined with its 57.20% stake in the critical pipeline infrastructure, reduces reliance on third parties and enhances operational flexibility.

In a market where energy majors face pressure to deliver returns, Shell’s Gulf of Mexico bet stands out as a prudent, value-accretive investment. With the Ursa field’s 800 MMboe legacy and the ORRI’s recurring income, this acquisition underscores Shell’s ability to maximize value from mature assets while positioning itself for future growth in one of the world’s most productive oil basins.