BANGKOK (BLOOMBERG) - Royal Dutch Shell, looking to pare debt swollen by last year's acquisition of BG Group, accelerated its drive to shed assets on Tuesday by agreeing to the sale of fields in the North Sea and Thailand for as much as US$4.7 billion (S$6.69 billion).
The disposals include the sale of about half the company's North Sea oil and gas assets for as much as US$3.8 billion to Chrysaor Holdings, Shell said. Earlier Tuesday, the company agreed to sell its stake in an offshore Thai gas field to a unit of Kuwait Petroleum for US$900 million.
Shell piled up borrowings following its biggest-ever acquisition, the US$54 billion purchase of BG, and needs to hit disposal targets to stave off credit rating reviews and maintain dividend payouts. While chief executive officer Ben van Beurden has made debt reduction a top priority, Shell missed its target for asset sales last year as low oil prices depressed valuations.
"This deal shows the clear momentum behind Shell's global, value-driven US$30 billion divestment program," Chief Financial Officer Simon Henry said in the statement. "It is also consistent with Shell's strategy to high-grade and simplify our portfolio following the acquisition of BG."
Shell rose 0.3 per cent to 2,252 pence as of 9:14 a.m. in London trading, paring the stock's loss to 4.3 per cent this year.
Shell had almost US$78 billion of net debt at the end of September. Net debt to capital, also called gearing, was at 29.2 per cent compared with 12.7 per cent a year earlier, and is among the highest for European oil companies.
The deal with Chrysaor includes an initial consideration of US$3 billion and a payment of up to US$600 million between 2018 and 2021 subject to commodity prices, with potential further payments of up to US$180 million for future discoveries. Shell retains a fixed liability of US$1 billion for any decommissioning costs associated with the North Sea assets, the company said.
"Shell clearly wanted to be seen to make a material disposal but also this vehicle has been structured to be a U.K. champion," Chrysaor CEO Phil Kirk said on a conference call. "We are looking at the top spot in the UK".
The package of assets consists of Shell's interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10 per cent stake in Schiehallion, Shell said. The fields represent total production of about 115,000 barrels of oil equivalent in 2016, compared with the company's total North Sea output of 211,000.