‘We are refocusing our investment,’ says Shell chief executive Ben van Beurden, days after issuing ‘significant’ profit warning
Royal Dutch Shell has agreed to sell stakes in a gas project in Western Australia for $1.14bn (£690m) as part of its drive to improve return on investment, the oil group said on Monday.
Shell is selling an 8% stake in the Wheatstone and nearby Iago gas fields and a 6.4% stake in the related Wheatstone liquefied natural gas (LNG) project to the Kuwait Foreign Petroleum Exploration Company (KUFPEC).
The move raises KUFPEC’s holding in the Chevron-led LNG project, in which the state company is already a partner, to 13.4%.
“We are making hard choices in our worldwide portfolio to improve Shell’s capital efficiency,” Shell’s chief executive, Ben van Beurden, who took over two weeks ago, said in a statement.
“We are refocusing our investment to where we can add the most value with Shell’s capital and technology,” he said, adding that the company would remain a major player in Australia’s energy industry.
KUFPEC is focused on using Opec member Kuwait’s oil wealth to diversify into energy projects abroad. Wheatstone, one of the super-sized Australian LNG projects due to come on stream over the next few years, is about 25% complete.
With some 80% of its future production committed to Asian buyers, the project is scheduled to cost about $29bn. Chevron expects capital spending on it to peak this year.
Shell issued a “significant” profit warning for the fourth quarter on Friday, in which it detailed across-the-board problems, less than three months after its third-quarter profits undershot analyst forecasts.
Analysts and shareholders said the company’s weak results would push the world’s number-three investor-controlled energy firm to keep a tighter control on costs after it said 2013 capital expenditure would peak at about $45bn.
Since Van Beurden began working alongside the outgoing boss Peter Voser at the start of the fourth quarter, the company has cancelled plans to build a gas-to-liquids plant in the United States, raising investor hopes of a tighter spending regime.
Shell is not the only big energy company facing increasing investor pressure to hold down spending as costs rise and prospects for higher oil prices wane.
At $1.14bn, the Wheatstone disposal kicks off a year in which Shell said it would significantly step up disposals to keep cash flowing in.
Recent media reports have suggested the company’s divestments could total $15bn this year, equivalent to about 6.5% of its $232bn market capitalisation.
“The thing that Shell has to do is accelerate divestments and re-instil capital discipline so in that vein it’s positive,” Jason Kenney, a Santander analyst, said.
Analysts and bankers say another of Shell’s Australian assets, its 23.1% stake in the Australian group Woodside Petroleum – worth more than$6bn at current prices – could be put on the block.