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Shell’s North Sea exit could generate $1bn, says UBS

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Jillian Ambrose7 SEPTEMBER 2016 • 1:27PM

Shell could be in line to make $1bn (£750m) in the next two years by selling off North Sea assets as part of a $30bn divestment drive, according to UBS.

The bank predicts that Shell’s North Sea retreat will begin with a “tidying up” of the oil major’s high-cost, legacy assets but that a sale of its attractive core projects could not be ruled out.

UBS oil analyst Jon Rigby said that sales of the oil giant’s older North Sea assets would only generate “a few hundred million dollars” unless the company opts for a more “radical” approach including ditching stakes in the core projects that make up its $7bn North Sea portfolio.

By streamlining its Norwegian assets alone the company stands to make $1bn, he said.

“There is of course room to be even more radical, potentially exiting very significant pieces of business that have hitherto been regarded as core.

“These would be more difficult because the asset and relationships are more entrenched and there are bound to be more significant vested interests within the Shell organisation. But what better way would there be to signal a new, radically different business?” Mr Rigby said.

The Anglo-Dutch company is preparing to withdraw completely from as many as 10 countries and will sell off around $30bn of assets within the next few years in a bid to rebalance its portfolio after the costly acquisition of gas giant BG Group earlier this year.

In the North Sea BG’s portfolio is worth $1-2bn and includes the attractive Buzzard oil field as well as central North Sea gas assets, while in Norwegian waters asset sales of at least $1bn are possible, Mr Rigby said.

“But in total, including the West of Shetland portfolio, we carry the business at around $7bn,” he added.

Mr Rigby said that although Shell may shy away from a complete exit from the UK, which is the FTSE 100 company’s primary listing, sales of core assets “cannot be ruled out”.

“You only have to look to Nigeria for an example of this. Shell has become an active seller of Nigerian onshore licences, which would have been unthinkable 10 years ago,” he said.

Analysts expect that Shell will sell its assets in packages that bundle up older, less profitable fields with more attractive propositions.

“What we’ve seen recently is that companies first identify what they want to sell and then what they are able to sell – but they will also look at who the potential buyers are in the market and then include assets with a view to what will attract these buyers,” Mr Rigby said.

In March the Telegraph reported that the $5bn Neptune Oil and Gas investment fund, led by former Centrica boss Sam Laidlaw, is in talks to snap up assets. The Blackstone-backed Siccar Point Energy fund is also circling Shell assets, according to reports.

In June Shell’s chief executive Ben Van Beurden laid out the company’s strategic plan for the rest of the decade, telling shareholders the group plans to leave between five and 10 countries and will focus on mature assets in established oil regions. 

International assets likely to be put on the block include Shell’s interests in its loss-making Canadian tar sands, and further sales of onshore oil assets in Nigeria.

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