Oil giant Royal Dutch Shell PLC (LON:RDSB) is raising US$7.2bn through the sale of its almost all its oil sands interests in Canada, with the firm to just retain a 10% stake in the Athabasca Oil Sands Project (AOSP).
A subsidiary of Canadian Natural Resources Limited (TOR:CHQ) will acquire Shell’s current 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.
Shell will receive approximately US$8.5bn (C$11.1bn) from Canadian Natural, comprised of US$5.4bn in cash plus around 98 mln Canadian Natural shares currently valued at US$3.1bn.
Separately, under a second agreement, Shell and Canadian Natural will jointly acquire and own equally Marathon Oil Canada Corporation, which holds a 20% interest in AOSP, from an affiliate of Marathon Oil Corporation (NYSE:MPC) for $1.25bn each in cash.
The combination of these transactions will result in a net consideration to the Anglo-Dutch firm of US$7.25bn.
Portfoilo reshaping …
Shell will remain operator of AOSP’s Scotford refinery and Quest carbon capture and storage project, with Canadian Natural signing a long-term supply agreement with the refinery.
The transactions are expected to close mid-2017, subject to regulatory approvals.
Shell’s 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.”
He added: “The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s US$30bn divestment programme.”
Shell is selling assets to cut back its debt which has ballooned following its US$54bn acquisition of BG Group last year.
Analysts welcomed the deal. RBC Capital Markets analyst, Biraj Borkhataria said: "This significant divestment should help de-gear Shell's balance sheet over 2017 and help remove concerns around the dividend.”
But Shell's shares in London fell back today as the oil sector dropped in reaction to weaker crude prices following a bigger-than-expected build in US stockpiles.
By lunchtime, the oil major's B shares were 3.5%, or 78p lower at 2,147.5p.
Bonuses and pay ...
As well as revealing the Canadian oil sands sale, Shell also announced separately today that from now on 10% of directors' bonuses will be tied to how well it manages greenhouse gas emissions in refining, chemical and upstream.
The group is also replacing an earnings per share calculation in long-term incentives for its directors with free cashflow, saying its disposals programme had made it a more important metric.
The latest annual report showed as well that Shell’s chief executive saw his pay jump by 60% to €8.263mln (U$8.7mln) in 2016.
-- Adds analyst comment; bonus changes, CEO pay details; updates share price --