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

Royal Dutch Shell plc (Shell), through its affiliate Shell Overseas Holdings Limited, has reached an agreement with CPP Investment Board Europe S.A.R.L. a wholly owned subsidiary of Canada Pension Plan Investment Board ("CPPIB"), to sell its shares in Shell E&P Ireland Limited, that holds 45% interest in the Corrib gas venture for up to $1.23* billion (€1.08 billion).


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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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Cautionary note

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this press release “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this press release refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This press release contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this press release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this press release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2016 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this press release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this press release, July 12, 2017. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this press release.

This press release may contain references to Shell’s website. These references are for the readers’ convenience only. Shell is not incorporating by reference any information posted on www.shell.com.

We may have used certain terms, such as resources, in this press release that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov


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