Shell Offloads Norwegian Assets – Analyst Blog

Royal Dutch Shell plc (RDS.A) announced plans to sell interests in the Norwegian sector of the North Sea, covering the Statfjord field and associated satellite fields. Shell will sell the assets to Centrica Resources (Norge) AS (“Centrica”) for a total consideration of NOK 1,370 million or $225 million.
 
The Statfjord field produces gas along with oil and natural gas liquids (NGLs). In 2009, Shell produced approximately 13,300 barrels of oil equivalent a day (boe/d) from the aforesaid field.
 
As per the agreement, Centrica will acquire 11.04% production license 037 (PL037) and corresponding shares in the underlying producing fields, including 9.44% interest in the Statfjord field from Shell. License partners in PL037 comprise Statoil ASA (STO) (operator), Petoro, Exxon Mobil (XOM) and ConocoPhillips (COP).
 
Shell will execute the deal through its 100%-owned subsidiary A/S Norske Shell, and its subsidiary Enterprise Oil Norge AS. The agreement currently awaits the approval of the Norwegian authorities.
 
With this divesture, Shell moves closer to accomplish its target of selling $7–$8 billion worth assets over 2010–2011 as part of its business strategy.
 
Shell owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. We also appreciate the company’s ongoing restructuring of portfolio with disposal of non-core assets. With a strong balance sheet and the financial flexibility, we believe that Shell will maintain an attractive dividend yield in the coming months.
 
However, the uncertain commodity-price scenario and the challenging economic environment will continue to weigh on the company’s shares. Hence, we maintain a long-term Neutral recommendation on the stock.
 
With an expectation that the stock will perform in line with the broader equity market, we have a Zacks #3 Rank (short-term ‘Hold’ recommendation) on Shell’s shares.