The company plans to funnel $9.5 billion from selling assets into shareholder returns and paying down debt
Thursday 23 Sep 2021 Author: Tom Sieber

The $9.5 billion sale of assets in the core oil producing Permian basin in the US suggests Royal Dutch Shell (RDSB) is doing more than paying lip service to the transition away from fossil fuels.

The transaction, with the 175,000 barrels of oil equivalent per day of output being sold to US peer ConocoPhillips, demonstrates the rupture between North American and European energy firms when it comes to the energy transition.

Shell has its feet to the fire on this issue after a May 2021 decision by a district court in the Netherlands which effectively pushed the company to speed up its plans to cut carbon emissions.

A good chunk ($7 billion) of the proceeds from the sale will be returned to shareholders, with broker RBC Capital Markets expecting this to take the form of share buybacks.

The remainder will go towards paying down debt. Completion on the deal is expected in the fourth quarter. Berenberg analyst Henry Tarr commented: ‘We expect the announcement to be taken positively, with the sale boosting shareholder returns materially, reducing carbon emissions and reducing debt levels.

‘The sale will, however, leave the company with a smaller asset base with which to cover and grow the dividend.’

This speaks to the dilemma facing the big integrated oil and gas producers as they look to pivot into renewables while protecting their balance sheets and funding dividends.

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