Shell completes sale of North Sea blocks to Chrysaor

Shell (ticker: RDSA) has completed the sale of a package of UK North Sea assets to Chrysaor for a total of up to $3.8 billion, including an initial consideration of $3.0 billion and a payment of up to $600 million between 2018-2021 subject to commodity price, with potential further payments of up to $180 million for future discoveries. This sale was announced on 31 January 2017 and has an effective date of 1 July 2016.

The package of assets consists of Shell’s interests in Buzzard, Beryl, Bressay, Elgin-Franklin, J-Area, the Greater Armada cluster, Everest, Lomond and Erskine, plus a 10% stake in Schiehallion. Shell retains a significant, more focused and strengthened presence in the UK North Sea, to which Shell said it remains committed.

In Q4 2017, Shell will record an accounting gain on sale of $1.0 billion against the values of both the Shell and former BG assets included in the package.

Shell said that 253 staff transferred from Shell to Chrysaor upon completion of the transaction.

Funding the deal

According to an announcement when the deal was announced, the deal is being funded by an investment of up to $1 billion from Harbour Energy, an investment vehicle formed by EIG and the Noble Group and managed by EIG, as well as from other funds managed by EIG, junior debt financing from Shell, and a Reserves Based Loan of up to $1.5 billion will be provided by a syndicate of leading international banks with considerable North Sea experience. The balance will be provided by a completion adjustment reflecting cash flows generated between the effective date of 1 July 2016 and closing.

Shell will make a payment to Chrysaor of up to $25 million a year between 2018-21 should the average oil price during that time fall in or below the range of $47.50 – $52.50 per barrel. Shell is providing a vendor loan to Chrysaor as part of the transaction and has signed hydrocarbon lifting and sales agreements for oil and gas produced from the assets being sold.

Shell Selling North Sea Assets to Chrysaor for $3.8 Billion

Shell Closes North Sea Asset Sale to Chrysaor for total of up to $3.8 Billion. Map: Chrysaor

Unit operating costs under $15 per barrel

Current unit operating costs across the portfolio are under $15 per barrel. The transaction is expected to comprise around 350 million barrels of oil equivalent proven and probable (2P) reserves as at the transaction effective date of 1 July 2016.


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