Shell Energy North America or SENA, a part of the integrated oil company Royal Dutch Shell plc RDS.A recently signed a purchase agreement to acquire power and retail electric company, MP2 Energy. The acquisition is expected to be closed by the third quarter of 2017.

The Woodlands-based MP2 operates power plants and provides retail power to final consumers. Its operations also include commodity hedging, asset and risk management, execution of transactions, and delivering according to the precise needs of the clients. On the other hand, SENA's operations incorporate commercial and industrial retail energy management on the west coast of the US.

The MP2 management team will continue to function after the acquisition as the company will operate as a wholly-owned subsidiary of SENA.

Although the financial details are yet to be disclosed, we would like to remind investors that Shell, belonging to the Zacks categorized Oil and Gas, International Integrated industry, is still under pressure following its $50 billion acquisition of BG Group plc. There are concerns related to the company’s increased net debt and reduction in liquidity. In the last six months, Shell’s units fell 3.8%.

Factors that Led to the Acquisition

The deal will diversify Shell's business and help it to expand its electricity presence beyond the West Coast and spreading into Texas, the Midwest and the East Coast. Shell will be able to use MP2's network and self-developed proprietary systems and technology to supply market-based solutions to manage energy supply, load, and generation. In particular, the MP2 buy will help complement Shell’s transition away from oil and gas as part of its efforts to reduce operational carbon footprint.

The acquisition will help SENA to provide its customers more innovative commodity solutions and new energy management tools. The rooftop solar system programs of MP2 will help Shell to expand on the renewable energy front. MP2’s skillset and Shell’s resources will help SENA further its edge in services and products. 

About the Company

Headquartered in The Hague, Netherlands, Shell explores for and extracts crude oil, natural gas, and natural gas liquids. The company transports oil and gas, converts natural gas to liquids to produce and market fuels and other products. It also extracts bitumen from mined oil sands and turns it into synthetic crude oil. Shell also generates electricity from the wind. The company divides its operations into four major segments: Upstream, Downstream, Corporate and Integrated Gas.