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Shell (RDS.A) to Divest Its Malampaya Gas Field for $460M

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Royal Dutch Shell (RDS.A - Free Report) has finalized an agreement to divest its stake in the Philippines-based Malampaya gas field to Malampaya Energy XP for up to $460 million. Notably, Malampaya Energy XP, which is a subsidiary of Udenna, will acquire a stake in Shell Philippines Exploration (SPEX) from Shell's unit Shell Petroleum. SPEX holds 45% interest in the Service Contract 38 (SC38), a deepwater licence that consists of the Malampaya gas field.

The base consideration for the deal is valued at $380 million with extra payments of nearly $80 million expected between 2022 and 2024, depending on the asset performance and commodity prices. The transaction is slated to close by the end of this year upon fulfilling all the necessary conditions and pending approvals.

The divestment is part of an ongoing portfolio rationalization by Shell to simplify and increase the flexibility of its business. The move is in sync with its strategy to secure the long-term sustainability of its business and grow in the new normal and energy transition.

Post completion of the deal, SPEX personnel who have contributed significantly to the Philippines and the local community over the past two decades will continue to work under the new ownership, guaranteeing stability, operational reliability and safety.

Last September, Udenna Corp. had shown a keen interest in acquiring Shell’s stake in the Malampaya project in partnership with the state-owned Philippine National Oil Company (PNOC), which already has a 10% interest in the project. The Udenna Group believes that Malampaya’s asset is of superior nature, which ensures the future welfare of the country and promises to preserve its energy security.

Notably, the project is a major source of electricity for the country's main island of Luzon. The discovery of Malampaya’s natural gas was made by Shell in 1991, which fuels four power plants satisfying about 20% of the country’s electricity demands.

About Shell

This integrated energy player belongs to a global group of energy and petrochemical companies. It is involved in all phases of the petroleum industry right from exploration to final processing and delivery. The company recently released first-quarter 2021 earnings results wherein the bottom line came ahead of the Zacks Consensus Estimate by 3.8%.

Zacks Rank & Key Picks

Shell has a Zacks Rank #3 (Hold), currently. Some better-ranked players in the energy  space are SilverBow Resources Inc. (SBOW - Free Report) , Matador Resources Company (MTDR - Free Report) and Continental Resources, Inc. (CLR - Free Report) , each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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