Shell Sells Irish Gas Field Stake for $1.2 Billion to Canada Pension Fund--Update
12 July 2017 - 9:19PM
Dow Jones News
By Michael Amon
LONDON-- Royal Dutch Shell PLC sold its stake in a controversial
Irish gas field for up to $1.23 billion to one of Canada's biggest
pension funds in a deal that will result in accounting losses of as
much as $750 million for the Anglo-Dutch energy company.
Shell led the development of the Corrib gas field, located in
the Atlantic Ocean about 52 miles off the coast of rural County
Mayo. The field began producing in 2015 after years of delays
caused by fierce local opposition to the construction of an
associated pipeline.
The deal with the Canada Pension Plan Investment Board takes
Shell out of the energy-development business in Ireland. A
subsidiary of the pension fund will take control of Shell's 45%
interest in Corrib, while Vermillion Energy, a Calgary-based
oil-and-gas producer, will become the new operator of the field,
Shell and the pension fund said on Wednesday.
The transaction is for $947 million initially with payments of
up to $285 million between 2018 and 2025, depending on gas prices
and production.
Shell said the sale was consistent with its plan to sell off $30
billion in assets by 2018, part of its effort to repair its balance
sheet after loading up on debt for the 2015 acquisition of BG Group
PLC for over $50 billion.
Andy Brown, a top Shell executive, said the company has
announced deals valued at over $20 billion.
"This transaction is part of our strategy to reshape Shell and
to deliver a world class investment case," Mr. Brown said.
Shell acquired the company that discovered Corrib in 2002, but
the British-Dutch firm's plans to build an onshore pipeline to
transport the field's gas to a terminal it would construct at
Bellanaboy in County Mayo met with fierce local opposition. That
resistance focused on concerns about the safety of the pipeline and
its effects on the environment. It led to changes to the pipeline's
path, including routing it through a 4.9 kilometer (3 miles long)
tunnel, the longest in Ireland, that increased the project's costs
and forced delays.
Those delays and changes are forcing Shell to take an impairment
charge of about $350 million in its second-quarter earnings
results.
The company also said it would take an accounting loss of about
$400 million because of currency fluctuations between the euro and
the dollar once the deal is completed, likely in the first part of
2018.
Shell will maintain a presence in Ireland through an aviation
joint venture, Shell and Topaz Aviation Ireland Ltd., based near
Dublin airport.
Write to Michael Amon at michael.amon@wsj.com
(END) Dow Jones Newswires
July 12, 2017 07:04 ET (11:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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