Shell to divest most Canadaian oil sands assets to Canadian Natural for $8.5 bn
09 Mar 2017
In a bid to in order to reduce debt, European energy giant, Royal Dutch Shell today struck a deal to sell almost all of its production assets in Canada's oil sands to Canadian Natural Resources Ltd in a deal valued at $8.5 billion (C$11.1 billion).
Under the terms of the deal, Shell will sell its entire 60-per cent stake in the Athabasca Oil Sands Project, its 100-per cent stake in the Peace River Complex in-situ assets, including Carmon Creek, and a number of undeveloped oil sands leases in Alberta, Canadato a subsidiary of Canadian Natural Resources.
Canadian Natural Resources will pay around $8.5 billion, comprising of $5.4 billion in cash plus around 98 million Canadian Natural shares currently valued at $3.1 billion.
The sale does not include its 10-per cent stake in the Athabasca mining project, Shell said.
Separately and under the second agreement, Shell and Canadian Natural will jointly acquire and own equally Marathon Oil Canada Corporation, which holds a 20-per cent stake in Athabasca Oil Sands Project, from an affiliate of Marathon Oil Corporation for $1.25 billion each in cash.
Both these transactions will result in a net consideration of $7.25 billion to Shell.
The sale will result in Shell taking a $1.3-billion to $1.5 billion post-tax impairment charge after completion. It will also remove 2 billion barrels of proven oil reserves from its books.
Post closing, expected in mid-2017, Canadian Natural will be the operator of the Athabasca Oil Sands Project upstream mining assets, and Shell will continue as operator of the Scotford upgrader and Quest CCS project, located next to the 100 per cent Shell-affiliate owned Scotford refinery and chemicals plants.
''This announcement is a significant step in re-shaping Shell's portfolio in line with our long-term strategy…. The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell's $30 billion divestment programme,'' said, Ben van Beurden, CEO of Shell.
In March last year, Shell decided to sell assets worth $30 billion in a bid to bolster its balance sheet, which had been downgraded by ratings agency Fitch a month after the Anglo-Dutch oil giant completed its $49-billion acquisition of BG Group. (See: Shell plans to sell assets worth $30 bn)
The disinvestment plan came after the London and Hague-based company sold assets worth $20 billion between 2014-1015.
But Shell has hit hurdles in the sale process since oil prices have crashed and is currently hovering at around $68 a barrel. When Shell sold assets worth $20 billion in 2014-15, oil prices were at around $100 a barrel.
Last year, Shell sold or agreed to sell around $6 billion of assets.
Plummeting crude prices have hit oil companies across the world and slashed earnings of other oil majors, including Exxon Mobil Corp and BP Plc, retarding investments in new oil exploration while at the same time hitting investor returns.
The London-listed company, like other rivals, has scaled down on spending on new projects. Last year it announced that it would reduce its planned capital spending over the next three years by $15 billion.
Shell is one of the world's largest energy companies and one of the six oil and gas super-majors with a market value of about €175.65 billion and annual revenues of $421 billion.
It operates in over 70 countries, produces 3.1 barrels of oil equivalent per day. It is also among the world's largest natural-gas companies and has sold 24 million tonnes of LNG in 2015.
Canadian Natural is one of Canada's largest energy companies and a leader in the oil sands, with a market capitalisation of approximately $35 billion (C$46 billion).
