Shell to divest Upstream interests in Ireland for up to $1.23 billion

The transaction includes an initial consideration of $947m (€830m) and additional payments of up to $285m (€250m) between 2018-2025, subject to gas price and production.

The transaction, which represents Shell’s exit from the upstream business in Ireland, is subject to partner and regulatory consents and is expected to complete in Q2, 2018. The transaction’s effective date is January 1, 2017.

The Shell share of the Corrib gas venture’s production represented approximately 27,000 barrels of oil equivalent/day in 2016.

Shell Energy Europe Limited (“SEEL”) has signed an offtake agreement for some 40% of the Corrib gas venture’s production for up to three years following completion.

CPPIB will be the new Corrib Gas JV partner and Vermilion will become the new operator of the Corrib Gas Venture.

“This transaction is part of our strategy to reshape Shell and to deliver a world class investment case,” said Shell’s Upstream Director, Andy Brown. “It demonstrates the strong momentum behind our three-year $30 billion divestment programme. At the half-way point, we have now announced deals valued at more than $20 billion.”

“This transaction is consistent with Shell’s strategy to concentrate our Upstream footprint where we can add most value. I’m confident that Corrib will continue to deliver energy successfully to the people and businesses of Ireland.”

Ronan Deasy, Shell’s Country Chair in Ireland, said, “Shell is very proud to have led the development of the Corrib gas field. Since coming on-stream, the field and facilities have delivered exceptional performance. I would like to pay tribute to all those who have contributed to the development of this important energy project. In particular, I wish to acknowledge our staff, stakeholders and the local community who have worked closely with us over the years.

“With our existing staff remaining with the asset - CPPIB as a partner; and Vermilion, as the operator, will be well placed to successfully own and manage Corrib.”

The transaction will result in an impairment charge of around US$350m, which will be taken in Q2, 2017. At completion, a negative non-cash Cumulative Currency Translation Difference of around US$400m will be released.

Shell will retain a presence in Ireland through its aviation joint venture, Shell and Topaz Aviation Ireland Limited based near Dublin airport.

Notes

The total sale price of up to$1.23 billion (€1.08 billion) comprise three key elements:

• An initial consideration of US$947m (€830m)
• Up to €150 million contingent on annual average NBP prices being above 2.03 euro cents/kWh between 2018 to 2022
• Up to €100m subject to exceeding certain production thresholds, payable annually between 2019 and 2025

Cumulative Currency Translation Difference (CCTD) is the impact of historical currency movements (Euro vs USD) on reported asset value. The difference in revaluation is booked into equity and only gets realised through the Profit & Loss upon liquidation of the entity. At the end of June, the estimated Profit & Loss would be a non-cash loss of $400m on completion. The CCTD and impairment will move until the time of deal completion. 

Canada Pension Plan Investment Board (CPPIB) is an investment management organization. Headquartered in Toronto. CPPIB is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At March 31, 2017, the CPP Fund totalled $316.7 billion.

* The transaction is Euro denominated and all dollar figures are based on a Euro/USD exchange rate of 1.14 (published ECB of 07/07/2017). All numbers have been rounded to the nearest million. Final proceeds in USD will depend of the actual exchange rate at the time of payment of the consideration by the buyer.

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