Royal Dutch Shell plc (RDS.A) announced that its subsidiary – Shell Petroleum Development Company of Nigeria Limited (“SPDC”) – has closed the divesture of its 30% interest in two Oil Mining Leases and related facilities in the Niger Delta, offshore Nigeria. SPDC received total cash proceeds of $488 million from the deal.
Shell sold its stakes in Oil Mining Leases 26 to Nigerian company FHN26 Limited, a unit of Afren plc, for $98 million. The divested property spreads over 185.3 square miles, with the current production level being 6,000 barrels of oil per day.
Oil Mining Lease 42 was sold for $390 million to a consortium Neconde Energy Limited comprising Nestoil Group, Aries E&P Company Limited, VP Global, Kulczyk Investments and Kulczyk Oil Ventures. The lease includes the oil fields of Batan, Egwa, Odidi and Jones Creek and associated facilities, where operations had been freeze due to military activity. However, Batan field resumed operations early this year and is currently producing approximately 15,000 barrels of oil per day.
Two other companies – the Nigerian affiliate of Total SA (TOT) and Nigerian Agip Oil Company Limited have awarded their interests, 10% and 5% respectively, in both leases to the buyers, netting a total of 45% interest.
The transaction has been approved by the relevant authorities of the Federal Government of Nigeria and the Nigerian National Petroleum Corporation.
This disposition forms a part of Shell’s strategic initiatives by exiting unprofitable markets to improve its performance and remain competitive in this difficult environment. The company aims to reap more benefits by concentrating on its onshore activities in Nigeria.
The Hague-based Royal Dutch Shell owns one of the largest integrated oil and gas businesses in the world. The group has operations worldwide and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources, and other energy-related businesses.
We remain optimistic on Shell’s prospects given its exposure to major projects with an emphasis on technological application to unconventional resources. Shell’s consistent financial and operational performance along with overseas market exposure continues to enhance its portfolio and market position.
However, Shell’s upside potential is restricted by a volatile macro backdrop, weak demand for fuel and international business risks. Hence, we are maintaining our long-term Neutral recommendation on the stock. Shell currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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