A decision has been made by Royal Dutch Shell to dispose of close to two thirds of the stake the oil giant still has in Woodside Petroleum, an Australian energy group, at a price of $1.7 billion. According to a statement that was released on Monday by the Anglo-Dutch energy firm, an underwriting agreement has been entered into with two banks with a view to selling 71.6 million shares at 31.10 Australian dollars per share.
This constitutes about 8.5% of Woodside’s stock and 64% of Shell’s interest in Woodside. Shell intends to use the proceeds to reduce its net debt. In order to improve the financial performance Royal Dutch Shell intends to divest assets worth approximately $30 billion.
This is not the first time that Royal Dutch Shell, which once owned approximately 33% of Woodside, is disposing a stake in the Australian energy group. Seven years ago Shell disposed of a 10% stake. Shell also sold a 9.5% stake in Woodside three years ago.
The first time Shell acquired a stake in Woodside was in the mid-20th century when the two companies formed a joint venture. At the turn of the century Shell attempted to take over Woodside but the move was thwarted by the government of Australia. Then, Woodside was running the only LNG plant in Australia known as the North-West Shelf, a fact which made the government fear Royal Dutch Shell would slow the expansion of Woodside in order to prioritize investments in other parts of the world.
Joint venture partners
After selling the stake, Shell’s remaining interest in Woodside will be 4.8% and the oil major has made a commitment not to dispose of any of the remaining stake for a period of three months. Despite the reduced stake Woodside and Shell will remain joint venture partners in two LNG projects in Australia.
“Woodside will maintain a close working relationship with Shell – as a joint venture partner and customer of Shell technology – and we recognise that Shell will always be part of our history,” said the Chief Executive Officer of Woodside, Peter Coleman, in a statement.
With the divestment the Anglo-Dutch giant has so far either agree to sell or already sold close to $25 billion worth of assets in its attempts to raise $30 billion. The divestiture programme was unveiled after Royal Dutch Shell acquired BG Group two years ago. Shell is next expected to raise about $2.8 billion after selling a stake in Natural Resources, a Canadian firm.