Shell to sell 19% stake in Australia’s Woodside for $5.7 billion

June 17, 2014 | Australia, LNG & LPG

Melbourne, Australia | – The Royal Dutch Shell Group launched a long-anticipated sale of most of its stake in Australia’s Woodside Petroleum Ltd on Tuesday, looking to reap about $5.7 billion as it moves to focus on developing its own gas assets in Australia.

The Board of Royal Dutch Shell’s Prelude Floating Liquefied Natural Gas (FLNG) Project in Australia, the world’s first FLNG facility.

Royal Dutch Shell’s Prelude Floating Liquefied Natural Gas (FLNG) Project in Australia, the world’s first FLNG facility.

The share disposal brings the Anglo-Dutch oil major closer to its goal of shedding $15 billion of assets as part of a drive to cut spending and streamline operations following a profit warning in late 2013.

The selldown, which reduces Shell’s holding to 4.5 percent from 23.1 percent, removes uncertainty that has weighed on Woodside’s share price since Shell sold a third of its stake in 2010 and flagged it was not a long-term holder.

As part of the deal, Woodside will buy back and cancel half the shares that Shell is selling, which Australia’s top petroleum producer said would effectively boost its earnings per share by 6 percent.

“It’s probably good. It removes the overhang and gets rid of a lazy balance sheet and they can get on with life,” Pengana Capital portfolio manager Tim Schroeders said.

The reduction in Shell’s stake marks a milestone in a long retreat from a company that it had tried to take over in 2001. That deal was ultimately blocked by the Australian government after Woodside argued that Shell may focus on offshore developments at the expense of Australian projects.

The sale, which came the week Woodside’s stock hit a three-year high, had been expected this year after Shell Chief Executive Ben van Beurden took the helm in January, outlining plans to sell $15 billion of assets in 2014-15.

So far, Shell has sold or put on the block around $12 billion of assets in Australia, Europe, Nigeria and North America.

Like other oil majors, Shell is under pressure from investors to cut soaring costs and increase profit distribution via dividends and share buy-backs. Some investors have predicted the asset sales target will rise as it looks unambitious compared to BP’s asset sales of around $50 billion.

Shell said it would focus efforts in Australia on its 25 percent stake in the massive Gorgon liquefied natural gas project and its Prelude floating LNG project, and had options for further LNG growth in Australia, Indonesia and North America.

“It doesn’t change our view of Australia as an important player on the global energy stage, or Shell’s central role in the country’s energy industry,” van Beurden said in a statement.