(EnergyAsia, June 23 2014, Monday) — Royal Dutch Shell’s sharply reduced 4.5% stake holding in Australian upstream firm Woodside following last week’s sale of 156.54 million shares will give both companies a freer hand to decide on their respective investment strategies.
The sale will ease more than a decade of tensions between the two companies that followed Shell’s failed attempt to fully acquire Woodside in 2000, and its sale of a 10% stake in the Perth-based firm in 2010 that was blamed for a sustained decline in the share price of the Australia-listed explorer and producer. Following Canberra’s decision to block the proposed takeover of Woodside and a decade of rising cost, Shell has radically altered its strategy for developing its Australian assets.
In November 2010, the Anglo-Dutch major signaled that it no longer wanted to be a long-term Woodside shareholder by selling down its stake to 24.27% that was further reduced to 23.1% last week.
Both companies will now focus on developing their respective strategies to develop their liquefied natural gas (LNG) projects.
Shell said it valued the sale at around US$5 billion on an after tax basis.
The sale, which represents 19% of Woodside’s issued share capital, was executed through an underwritten sell-down to equity market investors and a selective share buy-back by Woodside.
Shell CEO Ben van Beurden said the sale will improve the company’s capital efficiency and allow it to focus on growing its directly-owned assets in Australia.
Shell Australia’s chairman, Andrew Smith, said: “Woodside is an important strategic partner for us, through our investments in established projects such as the North West Shelf and growth opportunities such as Browse.
Australia represented Shell’s next phase of LNG growth through the 15-million tonne/year Gorgon LNG project, in which the major has a 25% interest, and the Shell-operated Prelude Floating LNG project (3.6 mtpa LNG + 1.7 mtpa NGLs), in which it holds a 67.5% interest.