TORONTO — Royal Dutch Shell says it has signed two agreements to sell its undeveloped oilsands interests in Canada for a net consideration of US$7.25 billion.
Under the first agreement, the Anglo-Dutch energy giant will reduce its 60 per cent interest in the Athabasca Oil Sands Project to 10 per cent and sell its 100 per cent interest in the Peace River Complex in-situ assets, including Carmon Creek and a number of undeveloped oilsands leases in Alberta, to a subsidiary of Canadian Natural Resources Ltd.
Shell says it would remain the operator of the project’s Scotford upgrader and Quest carbon capture and storage project. Canadian Natural would be expected to operate Athabasca’s upstream mining assets.
Shell says the deal is worth approximately US$8.5 billion (C$11.1 billion), comprised of $5.4 billion in cash plus around 98 million Canadian Natural shares currently valued at $3.1 billion.
Under the second agreement, which is also subject to regulatory approvals, Shell and Canadian Natural will jointly acquire and own Marathon Oil Canada Corp., which holds a 20 per cent interest in the Athabasca Oil Sands Project, for $1.25 billion each.
The transactions are expected to close in mid-2017, subject to regulatory approvals.
"These assets are an excellent fit for Canadian Natural, a highly experienced oil sands developer,” said Shell Canada president Michael Crothers in a release.
Shell CEO Ben van Beurden said the deals are a "significant step" in re-shaping Shell’s portfolio in line with its long-term strategy.
"We are strengthening Shell’s world-class investment case by focusing on free cash flow and higher returns on capital, and prioritizing businesses where we have global scale and a competitive advantage such as Integrated Gas and deep water," he said.
Corey Bieber, Canadian Natural’s chief financial officer, says the deal represents a "rare opportunity" to acquire a world class oilsands mining and upgrading asset like Athabasca.
"Unlike a greenfield development, there is no execution and construction risk or delays — this transaction is immediately cash flow and earnings accretive to Canadian Natural shareholders,” added Bieber.
Canadian Natural says as part of the agreements, it will welcome approximately 3,100 employees from Shell and Marathon Oil. About 2,760 of them work at the mines, 110 are in the Peace River in-situ region and 230 are based in Calgary.