Shell Faces Loss on Sale Of Stake in Irish Gas Field -- WSJ
July 13 2017 - 3:02AM
Dow Jones News
By Michael Amon
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 13, 2017).
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 about
52 miles off the Atlantic coast of rural County Mayo. The field
began producing in 2015 after years of delays caused by 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 Vermilion Energy Inc., 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 on Wednesday the sale was consistent with its plan to
sell off $30 billion in assets by 2018, as it repairs 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," he said.
Shell acquired the company that discovered Corrib in 2002, but
its plans to build an onshore pipeline to transport the field's gas
to a terminal it would construct at Bellanaboy in County Mayo
sparked fierce opposition.
That resistance focused on concerns about the safety of the
pipeline and its effects on the environment. The controversy led to
changes to the pipeline's path, including routing it through a 4.9
kilometer (3-mile-long) tunnel, the longest in Ireland, that
increased the project's costs and forced delays.
Those delays and changes are forcing Shell to book 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 13, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Shell (LSE:RDSA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Shell (LSE:RDSA)
Historical Stock Chart
From Apr 2023 to Apr 2024