Shell divest its entire 60% interest in AOSP
Royal Dutch Shell plc announces the completion of two previously announced agreements by Shell Canada Energy, Shell Canada Limited and Shell Canada Resources (“Shell”) that will see Shell sell all its in-situ and undeveloped oil sands interests in Canada and reduce its share in the Athabasca Oil Sands Project (AOSP) from 60% to 10%.
Under the first agreement, Shell has completed the sale to a subsidiary of Canadian Natural Resources Limited (“Canadian Natural”) its entire 60% interest in AOSP, its 100% interest in the Peace River Complex in-situ assets, including Carmon Creek, and a number of undeveloped oil sands leases in Alberta, Canada. The consideration to Shell from Canadian Natural is approximately $8.2 billion (C$10.9 billion), comprised of $5.3 billion in cash plus around 98 million Canadian Natural shares currently valued at $2.9 billion. Shell’s share position in Canadian Natural will be managed for value realisation over time.
Separately and under the second agreement, Shell and Canadian Natural have completed the joint acquisition and now own equally Marathon Oil Canada Corporation (“MOCC”), which holds a 20% interest in AOSP, from an affiliate of Marathon Oil Corporation for $1.25 billion each.
As previously announced, the transactions were estimated to result in a post-tax impairment of $1.3 to $1.5 billion of which $1.1 billion was taken in Q1, 2017 with a further $0.4 billion expected in Q2, 2017 based on final closing adjustments.
Effective June 1, 2017, Canadian Natural will operate the AOSP upstream mining assets, while Shell will continue as operator of the Scotford upgrader and Quest carbon capture and storage (CCS) project, located next to the 100% Shell-affiliate-owned Scotford refinery and chemicals plants.
Shell retains significant operations in Canada that are not affected by these transactions, including, in Upstream shales, with large acreage positions in the Duvernay and Montney formations; Downstream through chemicals, refining and marketing; and in Integrated Gas with the proposed LNG Canada project.
Related News: Shell invites binding bids for sale of UK Assets
Royal Dutch Shell has invited binding bids from parties including Ineos AG and Blackstone Group LP-backed Siccar Point Energy for the sale of some of its UK North Sea assets worth about $2 billion, according to people familiar with the matter.
North Sea-focused energy explorer Chrysaor Holdings Ltd. has teamed up with U.S. private equity firm EIG Global Energy Partners to submit a second-round bid before the Wednesday deadline, the people said, asking not to be identified as the information is private. No final agreements have been reached, they said.
The sale is a key part of Shell’s plans to divest about $30 billion in assets to help offset the $54-billion acquisition of BG Group this year, which increased debt and lowered its credit rating. CEO Ben van Beurden has vowed to boost savings following a two-year slump in crude. The company posted its lowest quarterly earnings in 11 years in July.
Shell is selling a package of assets, including its stake in Buzzard oil field, which it gained from BG Group, the people said. Shell also operates older fields in the UK’s North Sea, including the Brent project, which is used to set the global price benchmark, according to its website.
“Shell is continually evaluating its portfolio and is in contact with other parties regarding potential portfolio opportunities,” the company said in an emailed statement. “We have previously stated that a review of all assets, including those in the North Sea, is underway as part of our commitment to sell $30 billion of assets.”