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Shell Completes Sale of Stake in Thai Gas Field for $750M

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Royal Dutch Shell plc (RDS.A - Free Report) recently announced the completion of divestment of its stake in an offshore Thailand Gas Field to the country’s national upstream company PTT Exploration and Production (PTTEP), in a deal worth $750 million.

Per the deal, the European oil giant, through its subsidiaries namely Shell Integrated Gas Thailand Pte Limited and Thai Energy Co Limited, offloaded 22.2% interest in the Bongkot field and adjoining offshore acreage. The sale agreement would involve the company jettisoning stakes in Blocks 15, 16 and 17, along with Block G12/48.

Notably, early last year, Shell had entered into an agreement to sell stakes in the Bongkot field to Kuwait Petroleum Corporation for $900 million. The deal was set for closure by the end of the first quarter of 2017, subject to satisfactory conditions. However, the deal was called off as Shell and Thailand’s government could not come to terms regarding sale of shares within the stipulated time. However, the sale agreement with PTTPE, which was announced in January 2018, has been successfully completed after satisfactory closing conditions and regulatory approvals. Notably, Thailand represents promising part of Shell’s world-class portfolio and this divestment agreement will have no impact on other holdings in the country.

Just a day back, Shell also announced completion of the sale of its 15% holding in Petronas-led Malaysian LNG Tiga to Sarawak State Financial Secretary for $750 million, increasing the latter’s total interest in the project to 25%. Malaysian state-owned energy company Petronas owns 60% interest, while other co-owners namely Nippon Oil Finance and diversified conglomerate Mitsubishi Corporation hold 10% and 5% stakes, respectively. In addition, Shell inked a $556-million deal to divest stakes in two of its oil fields located offshore Norway to Norwegian producer OKEA AS.

These divestment deals take Shell’s $30-billion divestment program another step forward, with the company almost nearing its target. The divestment deals have provided the company a major uplift in its drive to decrease debt, following the acquisition of BG Group for $47 billion. With Shell already wrapping up divestment deals worth more than $27.5 billion and having announced further asset disposals of around $2 billion, the company remains focused to meet its target by 2018. The deals will also help the Zacks Rank #1 (Strong Buy) company upgrade and streamline its upstream portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shell purchased the Bongkot field, located in the Gulf of Thailand, in the process of acquiring BG Group Plc. The Bongkot natural gas field that started production in 1993, controls 30% of the energy supply for electricity generation, with current sales of around 841 million cubic feet per day of natural gas and 27,000 barrels per day of condensate.

Thailand’s PTTPE, which already owned 44.4% of the field’s stake, will now end up owning 66.7% interest, post the acquisition. The remaining 33.3% stake is held by France’s Total S.A. (TOT - Free Report) . With the acquisition of additional stakes from Shell, PTTPE’s sales volume is likely to increase to 302,000 barrels of oil equivalent per day (Boe/d) compared with 299,000 Boe/d in 2017. The deal is in sync with the company’s growth plans, as it intends to expand its petroleum reserves. In fact, it also placed bids in the auction of Bongkot field along with Chevron Corporation (CVX - Free Report) -operated Erawan field a few months back, the results of which will be declared in December. These two fields produce around 22.2 billion cubic feet per day, accounting for about 50% of Thailand’s gas demand. The company also plans to buy stakes in oil and gas reserves in the Southeast and Middle East regions.

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