Royal Dutch Shell Plc (NYSE: RDS.A) agreed to sell most of its Canadian oil sands assets for $8.5 billion, the latest international oil major to withdraw from the costly projects, which are among the most carbon-heavy.
Shell is trying to sell assets totaling $30 billion to cut debt following its $54 billion acquisition of BG Group and is under investor pressure to mitigate climate change risks.
As well as revealing the Canadian oil sands sale, Shell also said March 9 that 10% of directors' bonuses will now be tied to how well it manages greenhouse gas emissions in refining, chemical and upstream.
RELATED: Marathon’s $3.6 Billion A&D Swaps Oil Sands For Delaware Pay Dirt
Analysts welcomed the deal, under which Shell has agreed to sell its existing and undeveloped Canadian oil sands interests to Canadian Natural Resources Ltd. (NYSE: CNQ) and to cut its share in the Athabasca Oil Sands Project (AOSP) to 10% from 60%.
"This significant divestment should help de-gear Shell's balance sheet over 2017 and help remove concerns around the dividend," Biraj Borkhataria of RBC Capital Markets said.
Shell is also buying half of Marathon Oil Canada Corp. which brings the deal's value to Shell to $7.25 billion and its divestment plan total to around $20 billion as it works towards its target of $30 billion by late 2018.
Other oil firms including ExxonMobil Corp. (NYSE: XOM), ConocoPhillips Co. (NYSE: COP) and Statoil ASA (NYSE: STO) have written down or sold their Canadian oil sand assets.
Shell said it would remain as operator of the AOSP Scotford upgrader and the Quest carbon capture and storage project.
Shares in Shell were trading 1.1$ lower at 2:52 a.m. CT (8:52 GMT), in line with the sector index that was down 1.2%.
The company is also replacing earnings per share in directors' long-term incentives with free cash flow, saying its disposals program had made it a more important metric.
In its annual report, Shell said its CEO Ben van Beurden saw his pay jump 60% to 8.263 million euros (US$8.7 million) in 2016, the year he pulled off the BG purchase. (US$1 = 0.9482 euros)
Recommended Reading
Quantum Raises $10B for Oil, Gas, Midstream, Energy Transition
2024-10-29 - Quantum Capital Group raised $5.25 billion for its private equity flagship, Quantum Energy Partners VIII. A source told Hart Energy that most of the firm’s capital has gone into oil and gas because it offers the best risk-adjusted returns.
Artificial Lift Firm Flowco’s Stock Surges 23% in First-Day Trading
2025-01-17 - Shares for artificial lift specialist Flowco Holdings spiked 23% in their first day of trading. Flowco CEO Joe Bob Edwards told Hart Energy that the durability of artificial lift and production optimization stands out in the OFS space.
Energy Sector Sees Dramatic Increase in Private Equity Funding
2024-11-21 - In a 10-day period, private equity firms announced almost $20 billion in energy funding. Is an end in sight for the fossil fuel capital drought?
E&P Consolidation Ripples Through Energy Finance Providers
2024-11-29 - Panel: The pool of financial companies catering to oil and gas companies has shrunk along with the number of E&Ps.
Magnolia’s Board Adds Ropp as Independent Director
2025-01-07 - Alongside his experience in oil and gas operations, R. Lewis Ropp has a background in finance, capital markets and investment management, Magnolia Oil & Gas said.