Shell eyes book profit from $3.8bn sale of North Sea assets

Royal Dutch Shell has struck a pair of deal to sell assets in the North Sea and offshore Thailand for a total of $4.7bn.

In the larger of the two deals, Shell has agreed offload certain UK North Sea assets for a total of up to $3.8bn to Chrysaor, a UK vehicle backed by US private equity companies, of which the initial cash consideration is $3bn.

The initial payment, with completion expected in the second half of 2017, should lead to Shell recording an accounting gain on sale against the values of both the Shell and former BG assets included in the package.

“Importantly, the value here represents a profit against the book values of the assets, and a breakeven oil price above that for the BG acquisition," said chief financial officer Simon Henry.

Later on, Shell will receive a payment of up to $600m subject to Brent oil prices being above $60 per barrel in 2018-19 and above $70 per barrel in 2020-21, plus a potential sum up to $180m subject to the achievement of certain exploration milestones.

If the average oil price during that time fall in or below the range of $47.50 - $52.50 per barrel between 2018 and 2021, Shell will make a payment to Chrysaor of up to $25m a year.

The package of assets consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Block, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion, with around 400 staff expected to transfer to Chrysaor.

In a separate deal, Shell agreed a $0.9bn deal to offload a 22.222% equity stake held in the Bongkot field, and adjoining acreage offshore Thailand consisting of Blocks 15, 16 and 17 and block G12/48 to a subsidiary of Kuwait Foreign Petroleum Exploration Company.