Europe’s largest oil company Royal Dutch Shell plc (RDS.A) has sold almost a third of its 34% interest in Australian energy firm Woodside Petroleum Ltd. for about $3.3 billion. The Anglo-Dutch supermajor said that its Australian subsidiary Shell Energy Holdings Australia Limited (“SEHAL”) has offloaded 78.34 million Woodside shares to other investors.
The stake sale, underwritten by UBS AG (UBS) at A$42.23 ($42.64) apiece, is equal to 29.18% of Shell’s interest in Woodside, or about 10% of the Perth-based oil and gas producer’s issued capital. Following the closure of the transaction, Shell’s holding in Woodside will come down from 34.27% to 24.27%.
The Hague-based oil behemoth – which made a failed attempt to win control of Woodside in 2001 when the Australian government blocked its $10 billion takeover bid on national interest grounds – has committed to retain its remaining Woodside stake for at least a year unless there is a case of a takeover bid for Woodside, or unless Shell decides to sell a large portion to a strategic buyer.
We see the Woodside transaction as part of Shell’s efforts to free up funds (improving its balance sheet in the process) and focus instead on its own core projects. The company is looking to concentrate more on its investment in Australia through direct interests in assets and joint ventures, rather than indirect stakes. Shell already has significant gas interests in the country through its 25% stake in the Chevron (CVX) operated A$43 billion ($37 billion) Gorgon liquefied natural gas (LNG) venture. The group aims to spend as much as $50 billion in Australia over the next decade, the most in any region, as Shell shifts to producing natural gas instead of oil.
Royal Dutch Shell owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.
Even though the company has a Zacks #2 Rank (short-term Buy rating) the short run, we are Neutral on Royal Dutch Shell in the longer term.
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