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What Shell could unload next as part of $30B divestiture program

February 1, 2017

Royal Dutch Shell plc. has been on a divestiture spree after its debt-laden $50 billion purchase of BG Group plc last year, the latest being its sale of some of its oil and gas properties in the North Sea to private equity-backed Chrysaor Holdings Ltd. for $3.8 billion as well as its stake in a Thailand field to Kuwait Petroleum Corp. for $900 million.

The sales — which follow the recent unloading of assets in Saudi Arabia, Japan and Australia — are nudging it toward 40% of the $30 billion divestiture goal it hopes to reach by the end of next year. What could be next?

There’s been talk that the Anglo-Dutch oil and gas giant has been in discussions to sell its Gabon assets to the Carlyle Group or Perenco for around $700 million. There have also been rumors that the company might shed its interest in a liquefied natural gas export plant in Malaysia, which could bring in more than $1 billion. Shell confirmed in December it was talking about selling its stake in German refinery PCK to Varo Energy, a joint venture between Carlyle and oil trading giant Vitol, although it didn’t disclose potential terms.

Shell could also do some trimming in North America. Analysts at Tudor, Pickering, Holt & Co. Securities see its properties in East Texas’ and northwest Louisiana’s Haynesville Shale — where buyer interest has picked up — as a disposal candidate, a sale that could potentially generate $750 million in proceeds. They also eye potential in the company’s undeveloped acreage in Canada’s Duvernay shale play that they value at $1.2 billion. The company already sold $1 billion worth of properties in western Canada this past fall.

Analysts at Piper Jaffray unit Simmons & Co. International said the value Shell received for this latest set of divestitures in the North Sea and Thailand “appears reasonable” in this commodity environment and that the company is showing nice momentum on the asset sales front. They added that given the number of transactions the oil and gas industry has announced over the last few months, the macro environment for acquisitions and divestitures has clearly improved – “a positive for the future of Shell’s asset sales program.”

Simmons has an overweight rating on the A shares with a price target of $59 per share, versus a close of $53.71 on Monday.

By Claire Poole

Source: Forbes

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