Royal Dutch Shell PLC sold its stake in a controversial Irish gas field for up to $1.23 billion to one of Canada's biggest pension funds in a deal that will result in accounting losses of as much as $750 million for the Anglo-Dutch energy company.
Shell led the development of the Corrib gas field, located in the Atlantic Ocean about 52 miles off the coast of rural County Mayo. The field began producing in 2015 after years of delays caused by fierce local opposition to the construction of an associated pipeline.
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The deal with the Canada Pension Plan Investment Board takes Shell out of the energy-development business in Ireland. A subsidiary of the pension fund will take control of Shell's 45% interest in Corrib, while Vermillion Energy, a Calgary-based oil-and-gas producer, will become the new operator of the field, Shell and the pension fund said on Wednesday.
The transaction is for $947 million initially with payments of up to $285 million between 2018 and 2025, depending on gas prices and production.
Shell said the sale was consistent with its plan to sell off $30 billion in assets by 2018, part of its effort to repair its balance sheet after loading up on debt for the 2015 acquisition of BG Group PLC for over $50 billion.
Andy Brown, a top Shell executive, said the company has announced deals valued at over $20 billion.
"This transaction is part of our strategy to reshape Shell and to deliver a world class investment case," Mr. Brown said.
Shell acquired the company that discovered Corrib in 2002, but the British-Dutch firm's plans to build an onshore pipeline to transport the field's gas to a terminal it would construct at Bellanaboy in County Mayo met with fierce local opposition. That resistance focused on concerns about the safety of the pipeline and its effects on the environment. It led to changes to the pipeline's path, including routing it through a 4.9 kilometer (3 miles long) tunnel, the longest in Ireland, that increased the project's costs and forced delays.
Those delays and changes are forcing Shell to take an impairment charge of about $350 million in its second-quarter earnings results.
The company also said it would take an accounting loss of about $400 million because of currency fluctuations between the euro and the dollar once the deal is completed, likely in the first part of 2018.
Shell will maintain a presence in Ireland through an aviation joint venture, Shell and Topaz Aviation Ireland Ltd., based near Dublin airport.
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(END) Dow Jones Newswires
July 12, 2017 07:04 ET (11:04 GMT)