Shell to exit up to 10 countries in cost cutting drive after BG deal

Royal Dutch Shell (RDSa.L) will exit oil and gas operations in up to 10 countries in a drive to deepen cost cuts as it weathers weak oil prices and has to pay down debt following its $54 billion acquisition of BG Group.

The company is active in more than 70 countries and said it would like to focus on 13 important nations where it is making good returns, including Brazil, Australia and the United States.

The move, which includes the sale of 10 percent of its oil and gas production assets, will make Shell a smaller company that offers investors access to a more gas-heavy portfolio than some of its rivals such as Exxon Mobil (XOM.N).

Shell will slow new investment in its integrated gas business, which includes its liquefied natural gas (LNG) operations, which it said has “reached critical mass following the BG acquisition”.

The merger has turned Shell into the world’s second biggest international oil company behind Exxon Mobil and the top LNG trader.

In the long term, the company said it would target shale oil and gas production in North America and Argentina as well as biofuels, hydrogen, solar and wind in a new energies unit.

Shell plans to sell $30 billion worth of assets around the world by around 2018 and quit operations in 5 to 10 countries to reduce its balance sheet gearing which soared to 26 percent following the BG deal. It also has announced it plans to implement a share buyback programme.

It did not say which countries it might exit. Reuters has reported that Shell plans to sell its assets in Gabon.

Shell targets $6-8 billion in sales in 2016. CFO Henry said the company expects to make at least $3 billion mainly from downstream disposals this year as refining, infrastructure and retail are more immune to oil price fluctuations.

However, sales of oil and gas production assets have dropped through the downturn amid high oil price volatility.

(Reuters)

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