Deals

Shell reportedly plans to dispose of its North Sea assets

March 28
9:57 AM 2016

Royal Dutch Shell, a UK-based oil and gas firm, is reportedly seeking buyers for its North Sea assets following the merger with BG. The oil company intends to raise $30 billion by selling its assets globally in order to balance the BG merger expenses, which it completed in February.

Shell, which has roughly 2,500 workers in the North Sea oil fields, said it expects the global sales to occur between 2016 and 2018, with less than $10 billion of sales anticipated to happen in 2016. Financial Times quoted a spokesperson from Shell, who said, "A review of all assets, including those in the North Sea, is under way as part of our commitment to the $30bn asset sale." Ben van Beurden expects his industrial rivals and private equity firms to be the potential buyers of North Sea assets.

Shell has appointed advisors to aid the company to dispose of its North Sea oil fields. The company's decision comes amid the falling oil prices that have impacted its operations in the Northern Sea region. With regard to this move, Lazard, Morgan Stanley and Bank of America Merrill Lynch have held negotiations with potential buyers like Neptune Oil and Gas, an investment company founded by Sam Laidlaw, a previous chief of Centrica. According to This is MONEY, oil firms have been pulling back their capitals in the North Sea, citing poor oil price.

A spokesman for Neptune said that the fund is considering Shell's assets along with other oil assets as part of its business strategy to invest in the gloomy North Sea assets. In 2015, the company's divestments totalled $5.5 billion, bringing its total divestments value to $20 billion for the period between 2014 and 2015. Moreover, the North Sea assets disposal will trim 10,000 jobs across the company's global business. The company plans to axe roughly 2,800 workforces in the following few months.

Meanwhile, Brent crude LCOc1 increased 25 cents to $40.69 a barrel on the commodity market. Prices of oil rebound nearly 50% from a record low hit in January. The price rally was helped by major producers' move to freeze their production at January flat. Reuters quoted Victor Shum, a senior energy expert at IHS, who said that the April 17 summit will create a pressure on OPEC members to decide on more profitable factors, which otherwise would lead to market dissipation.

In addition, declining oil production in the US and robust demand for US gasoline helped oil prices to recover from its historical low in January. Last week, Brent crude dropped 76 cents, marking the first drop since five weeks.

The wavering oil prices have forced many oil firms like Shell to shed their North Sea assets. The oil firms are struggling to boost their balance sheet amid the fluctuating oil prices.

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