18 October 2018, News Wires — Royal Dutch Shell has agreed to sell its Danish upstream business to Norwegian Energy (Noreco) for $1.9 billion as part of its wider divestment strategy, the company said on Wednesday.
The sale brings Shell’s three-year $30 billon divestment plan close to its conclusion, having begun the process in 2015 after the acquisition of BG Group. Deals so far have included large portfolios in the British North Sea, Gabon, Thailand and Canada.
“Today’s announcement is consistent with Shell’s strategy to simplify its portfolio through a $30 billion divestment program and contributes to our goal of reshaping the company into a world-class investment case,” Shell’s upstream director, Andy Brown, said in a statement.
The latest transaction, for a business that had output of 67,000 barrels of oil equivalents per day (boed) last year, would make Noreco the second-largest oil and gas producer in Denmark behind French oil major Total, the Norwegian company said.
Noreco said the deal comprised proven and probable (2P) reserves of 209 million barrels of oil equivalents (mmboe) at the end of last year, 65 percent of which were liquids.
Shares in Oslo-listed Noreco surged 90 percent to 288.50 Norwegian crowns ($35.30) on the announcement and closed 54 percent up on the day at 231.50 crowns. Shell’s shares eased by 0.4 percent.
As part of the deal, Noreco will assume all of Shell’s existing commitments and obligations, including the Tyra field redevelopment.
“Noreco expects to maintain strong production in the years to come … As the Tyra hub is being redeveloped, the portfolio will be revitalized and offer improved economics accompanied by prolonged field life,” Noreco added.
DUC partners decided in December to redevelop the Tyra gas field at a cost of 21 billion Danish crowns ($3.25 billion), prolonging its life and enabling production of more than 200 mmboe.
Noreco said funding for the Shell deal would be provided by a private placement of new shares and a convertible bond, as well as a $900 million loan from BMO Capital Markets, Deutsche Bank and Natixis.