MOSCOW (MRC) -- Royal Dutch Shell plc has announced the signing of two agreements by Shell Canada Energy, Shell Canada Limited and Shell Canada Resources that will see Shell sell all of 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%, as per the company's press release.
Shell will remain as operator of AOSP’s Scotford upgrader and Quest carbon capture and storage (CCS) project.
Under the first agreement, Shell will sell to a subsidiary of Canadian Natural Resources Limited 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 USD8.5 billion (CD11.1 billion), comprised of USD5.4 billion in cash plus around 98 million Canadian Natural shares currently valued at USD3.1 billion. Canadian Natural is one of Canada’s largest energy companies and a leader in the oil sands, with a market capitalisation of approximately USD35 billion (CD46 billion).
Separately and under the second agreement, Shell and Canadian Natural will jointly acquire and own equally Marathon Oil Canada Corporation (MOCC), which holds a 20% interest in AOSP, from an affiliate of Marathon Oil Corporation for USD1.25 billion each, to be settled in cash.
The combination of these transactions will result in a net consideration of USD7.25 billion to Shell.
On completion of all transactions listed above, it is envisaged that Canadian Natural will be the operator of the AOSP upstream mining assets, and Shell will continue as operator of the Scotford upgrader and Quest CCS project, located next to the 100 percent Shell-affiliate owned Scotford refinery and chemicals plants. This arrangement is expected to allow Shell to maximise value in its competitive Canadian Downstream business and leverage proprietary technology. The transactions are expected to close mid-2017, subject to customary closing conditions and adjustments and regulatory approvals.
Shell Chief Executive Officer Ben van Beurden said: "This announcement is a significant step in re-shaping Shell’s portfolio in line with our long-term strategy. We are strengthening Shell’s world-class investment case by focusing on free cash flow and higher returns on capital, and prioritising businesses where we have global scale and a competitive advantage such as Integrated Gas and deep water. The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30 billion divestment programme."
Shell and Canadian Natural have agreed that, subject to closing of the transactions and additional further conditions, Shell may swap its 50% purchased interest of MOCC for a 20% interest in assets of the Scotford upgrader and Quest CCS project. If the swap were to occur, Shell would fully exit AOSP’s mining operations and hold a 20% interest in the Scotford upgrader and Quest CCS project.
As MRC informed before, in March 2016, Royal Dutch Shell Plc lined up assets for a USD30 billion divestment program that might extend from the US and Trinidad to India following its record takeover of BG Group Plc.
Royal Dutch Shell, commonly known as Shell, is an Anglo–Dutch multinational oil and gas company headquartered in the Netherlands and incorporated in the United Kingdom.Created by the merger of Royal Dutch Petroleum and UK-based Shell Transport & Trading, it is the fourth largest company in the world as of 2014, in terms of revenue, and one of the six oil and gas "supermajors".