Royal Dutch Shell Plc (NYSE: RDS.A) is nearing the sale of a large part of its North Sea oil and gas assets to private equity-backed Chrysaor Holdings Ltd. for $3 billion, banking sources said, marking a milestone in its drive to reduce debt after buying BG Group.
Chrysaor, a North Sea-focused oil company backed by private equity fund EIG Partners, will acquire from Shell a mix of older fields, new developments and infrastructure in a move analysts say could breathe new life into one of the world's oldest offshore basins where production has been in a steady decline since the late 1990s.
The anticipated deal in what is a relatively high-cost region has been seen by the industry as a litmus test for the sector's appetite for buying and selling oil and gas fields, known as upstream, as it slowly emerges from a brutal two-and-a-half year downturn. It could now unlock other deals in the North Sea and other regions.
Shell and Chrysaor declined to comment.
The deal is expected to be announced in the coming days to coincide with Shell's full-year results on Feb. 2, several sources said.
Chrysaor will take charge of hundreds of Shell and former BG employees that work on the platforms.
It will also become operator of several fields, highlighting the changing landscape in the North Sea where oil majors such as Shell and BP are finding it harder to make profits.
In November, Austrian oil and gas group OMV AG agreed to sell its U.K. unit to private-equity backed Siccar Point Energy Ltd. for $1 billion.
Chrysaor has been given the green light by Britain's Oil and Gas Authority regulator to operate fields in the North Sea. The deal also includes an "innovative" structure to tackle the expensive and complex decommissioning of platforms and infrastructure once production in fields is ended, sources said.
For the Anglo-Dutch company, the deal could kick-start a string of other upstream sales that have struggled to attract interest throughout the downturn to help it meet its $30 billion disposal target by around 2018 following the $54 billion acquisition of BG Group in February 2016.
Several companies have looked at Shell's North Sea portfolio in recent months including A.P. Moller-Maersk, petrochemical giant Ineos Group Ltd. and private equity fund Carlyle Group (NYSE: CG), according to banking sources.
Shell's asset bundle includes a nonoperating stake in Buzzard north of Aberdeen, a relatively new field that feeds into the global Brent oil benchmark and a share in Shell's 55% holding in the BP Plc (NYSE: BP)-operated Schiehallion oil field some 180 km (110 miles) west of the Shetland Islands.
Other assets include the Nelson, Armada, Everest, Lomond and J Block fields, and Shell's stake in the Statoil ASA (NYSE: STO)-led Bressay development, according to banking sources.
Shell has sold or agreed to sell around $7.8 billion of assets since announcing the deal in April 2015, though the majority of them were in the refining sector and infrastructure.
Recommended Reading
Proven Volumes at Aramco’s Jafurah Field Jump on New Booking Approach
2024-02-27 - Aramco’s addition of 15 Tcf of gas and 2 Bbbl of condensate brings Jafurah’s proven reserves up to 229 Tcf of gas and 75 Bbbl of condensate.
Well Logging Could Get a Makeover
2024-02-27 - Aramco’s KASHF robot, expected to deploy in 2025, will be able to operate in both vertical and horizontal segments of wellbores.
E&P Highlights: March 11, 2024
2024-03-11 - Here’s a roundup of the latest E&P headlines, including a new bid round offshore Bangladesh and new contract awards.
NAPE: Chevron’s Chris Powers Talks Traditional Oil, Gas Role in CCUS
2024-02-12 - Policy, innovation and partnership are among the areas needed to help grow the emerging CCUS sector, a Chevron executive said.
Oceaneering Won $200MM in Manufactured Products Contracts in Q4 2023
2024-02-05 - The revenues from Oceaneering International’s manufactured products contracts range in value from less than $10 million to greater than $100 million.