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Shell selling nearly all Canadian oil sands assets to CNRL

CALGARY, A.B. — Royal Dutch Shell will sell almost all of its oil sands assets worth $7.25 billion to Canadian Natural Resources Ltd.

According to an article from Bloomberg News, with the exception of a 10 percent stake in the Athabasca mining project, CNRL will buy all of the company’s oil sands interests.

Shell is going through a $30 billion divestment program to reduce debt, which rose dramatically after it acquired BG Group Plc last year. This week, the company ended a nearly twenty year U.S. refining partnership with Saudi Aramco, and also sold a collection of oil fields in the North Sea earlier this year.

“This announcement is a significant step in re-shaping Shell’s portfolio,” Chief Executive Officer Ben Van Beurden said in a statement. “The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30 billion divestment program.”

Alberta’s oil sands saw a large jump in investments in the last ten years as the price of crude rose above US$100/barrel, making the extraction process more financially feasible. They’ve since fallen out of favour following a crash in oil prices in the last two years.

The sale will see Shell take a $1.3 billion to $1.5 billion post-tax impairment charge after completion, according to the statement. It will also remove about 85 percent of the proven 2 billion barrels of oil-sands reserves from its books. The company had 13.25 billion barrels of total oil and gas reserves at the end of 2016, according to its annual report.

Canadian Natural will purchase Shell’s 60 percent interest in the Athabasca project, all of the Peace River Complex in-situ assets, and a number of undeveloped leases in Alberta. Those disposals will fetch about $8.5 billion, comprising cash and shares.

According to Shells’s annual report, its share of output from the Athabasca project was about 150,000 barrels a day, with another 14,800 barrels a day from Peace River. Total oil and gas production in 2016 averaged 3.7 million barrels of oil equivalent a day,.

The sale is expected to close in mid-2017, subject to regulatory approvals.

Story courtesy Bloomberg News: https://www.bloomberg.com/news/articles/2017-03-09/shell-agrees-to-sell-oil-sands-operations-for-7-25-billion.

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