DUBLIN: The Netherlands-based Royal Dutch Shell PLC (NYSE: RDS-A, RDS-B), which has a major presence in Houston, has reached a deal to sell its upstream business in Ireland for up to $1.23 billion. A subsidiary of Toronto-based Canada Pension Plan Investment Board will acquire Shell’s 45 percent stake in the Corrib Natural Gas Field venture. The deal is expected to close in the second quarter of 2018, and Shell will receive an initial payment of $947 million, according to a July 12 press release. Subject to gas price and production, Shell could receive additional payments of up to $285 million from 2018 to 2025. When Shell’s deal with CPPIB closes, Canada-based Vermillion Energy Inc. (NYSE: VET) will become the operator of the Corrib venture. According to a separate press release, CPPIB plans to transfer a portion of its acquired stake to Vermillion, resulting in the former holding a 43.5 percent non-operated interest, the latter holding a 20 percent operated interest and Norway-based Statoil ASA retaining its 36.5 percent non-operated interest.
Shell’s share of the venture’s production was about 27,000 barrels of oil equivalent per day last year. The company will take an impairment charge of approximately $350 million in the second quarter of 2017. Meanwhile, Shell will still have have a presence in Ireland through its aviation joint venture, Shell and Topaz Aviation Ireland Ltd. Additionally, Shell Energy Europe Ltd. has an off-take agreement for about 40 percent of the Corrib venture’s production for up to three years following completion. “This transaction is part of our strategy to reshape Shell and to deliver a world-class investment case,” Andy Brown, Shell’s upstream director, said in the company’s release. “It demonstrates the strong momentum behind our three-year, $30 billion divestment program. At the halfway point, we have now announced deals valued at more than $20 billion.”
Shell has been eyeing that $30 billion figure since it announced plans in 2015 to acquire London-based BG Group PLC. Last year, the company announced deals to sell non-core oil and gas properties in Canada for nearly $1.04 billion and Gulf of Mexico assets for $425 million. Shell also sold its Gabon onshore interests for $587 million in March. Meanwhile, CPPIB recently made two other $1 billion deals with Houston companies. CPPIB will acquire real estate investment trust Parkway Inc. (NYSE: PKY), and it formed a joint venture with Encino Energy LLC to acquire oil and gas acreage in the U.S.