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Shell to Vend Danish Assets for $1.9B to Optimize Portfolio
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In a bid to simplify its portfolio, Royal Dutch Shell plc recently inked a deal to divest its interests in Shell Olie-og Gasudvinding Danmark B.V. (SOGU) for a total consideration of $1.9 billion to Norwegian Energy Company ASA aka Noreco. Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure in 2019.
Shell’s wholly owned subsidiary SOGU carries 36.8% non-operating stake in the Danish Underground Consortium (DUC). Notably, DUC is a joint venture between TOTAL SA , Shell, Chevron Corporation (CVX - Free Report) and Nordsofonden to explore oil in the Danish North Sea. DUC commenced production in 1972 and accounts for nearly 90% of Danish oil and gas output, with an average production capacity of 182,000 barrels of oil equivalent per day (Boe/d). The assets to be offloaded contributed to production of 67,000 Boe/d for Shell’s upstream portfolio in 2017.
Per the deal, Noreco will assume Shell’s existing commitments related to the assets, including Tyra redevelopment and decommissioning costs. TOTAL and its DUC partners have agreed to invest nearly $3.27 billion ($21 billion DKK) to develop the Tyra Gas field, which will be able to produce 60,000 barrels of oil equivalent per day (Boe/d) from 2022.
While the deal marks the sale of Shell’s entire upstream holdings in Denmark, it does not represent a total retreat of the company from the country. The European oil giant will still retain downstream presence in the country post completion of the deal through Shell-branded retail stations in Denmark and stakes in A/S Dansk Shell, which include Fredericia refinery.
Lately, Chevron also entered into an agreement to jettison its 12% interest in DUC to TOTAL. Subsequent to the completion of Chevron’s deal with TOTAL, the latter will be the holding 43.2% interest in DUC, up from its existing share of 31.2%. Acquisition of interest will further increase TOTAL’s presence in the Danish Shelf and allow it to operate a consortium that controls the majority of Danish oil and gas production.
Shell’s Divestment Targets Well Within Reach
The divestment is in line with Shell's strategy to steer clear of debt stemming from its $50-billion acquisition of BG Group. Notably, the company has already vended more than $27 billion assets, as part of its $30-billion 2016-2018 divestment plan. The company has been offloading its non-core assets in Malaysia, Norway, Iraq, New Zealand, U.K., Canada, Gabon, Ireland, Thailand, among others. Reportedly, the company is also in talks to sell its stakes in Caesar Tonga field in Gulf of Mexico to Focus Oil for more than $1 billion.
With Shell already wrapping up transactions worth around $27.5 billion, the company remains focused to meet its $30-billion target by 2018. Additionally, Shell intends to divest more than $10 billion worth of assets over the 2019-2020 time period. The move will help the company to upgrade and streamline its portfolio.
Zacks Rank and Key Pick
Headquartered in the Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution, and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold).
While the company’s aggressive divestment of assets is enhancing its cash flows, boosting its portfolio and increasing operational efficiency, it is also leading to reduction in its production growth. Shell saw its second-quarter oil and gas production decline sequentially as well as from the year-ago period. The group's disposal program could further affect volume growth.
Eni expects its earnings to witness year-over-year growth of 92.05% in 2018.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Shell to Vend Danish Assets for $1.9B to Optimize Portfolio
In a bid to simplify its portfolio, Royal Dutch Shell plc recently inked a deal to divest its interests in Shell Olie-og Gasudvinding Danmark B.V. (SOGU) for a total consideration of $1.9 billion to Norwegian Energy Company ASA aka Noreco. Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure in 2019.
Shell’s wholly owned subsidiary SOGU carries 36.8% non-operating stake in the Danish Underground Consortium (DUC). Notably, DUC is a joint venture between TOTAL SA , Shell, Chevron Corporation (CVX - Free Report) and Nordsofonden to explore oil in the Danish North Sea. DUC commenced production in 1972 and accounts for nearly 90% of Danish oil and gas output, with an average production capacity of 182,000 barrels of oil equivalent per day (Boe/d). The assets to be offloaded contributed to production of 67,000 Boe/d for Shell’s upstream portfolio in 2017.
Per the deal, Noreco will assume Shell’s existing commitments related to the assets, including Tyra redevelopment and decommissioning costs. TOTAL and its DUC partners have agreed to invest nearly $3.27 billion ($21 billion DKK) to develop the Tyra Gas field, which will be able to produce 60,000 barrels of oil equivalent per day (Boe/d) from 2022.
While the deal marks the sale of Shell’s entire upstream holdings in Denmark, it does not represent a total retreat of the company from the country. The European oil giant will still retain downstream presence in the country post completion of the deal through Shell-branded retail stations in Denmark and stakes in A/S Dansk Shell, which include Fredericia refinery.
Lately, Chevron also entered into an agreement to jettison its 12% interest in DUC to TOTAL. Subsequent to the completion of Chevron’s deal with TOTAL, the latter will be the holding 43.2% interest in DUC, up from its existing share of 31.2%. Acquisition of interest will further increase TOTAL’s presence in the Danish Shelf and allow it to operate a consortium that controls the majority of Danish oil and gas production.
Shell’s Divestment Targets Well Within Reach
The divestment is in line with Shell's strategy to steer clear of debt stemming from its $50-billion acquisition of BG Group. Notably, the company has already vended more than $27 billion assets, as part of its $30-billion 2016-2018 divestment plan. The company has been offloading its non-core assets in Malaysia, Norway, Iraq, New Zealand, U.K., Canada, Gabon, Ireland, Thailand, among others. Reportedly, the company is also in talks to sell its stakes in Caesar Tonga field in Gulf of Mexico to Focus Oil for more than $1 billion.
With Shell already wrapping up transactions worth around $27.5 billion, the company remains focused to meet its $30-billion target by 2018. Additionally, Shell intends to divest more than $10 billion worth of assets over the 2019-2020 time period. The move will help the company to upgrade and streamline its portfolio.
Zacks Rank and Key Pick
Headquartered in the Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution, and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold).
Royal Dutch Shell PLC Price
Royal Dutch Shell PLC Price | Royal Dutch Shell PLC Quote
While the company’s aggressive divestment of assets is enhancing its cash flows, boosting its portfolio and increasing operational efficiency, it is also leading to reduction in its production growth. Shell saw its second-quarter oil and gas production decline sequentially as well as from the year-ago period. The group's disposal program could further affect volume growth.
Investors interested in the same industry may consider top-ranked players like Eni SpA (E - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Eni expects its earnings to witness year-over-year growth of 92.05% in 2018.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>