Shell Sells Non-Core Canadian Shales for $1bn

Shell said late October 20 it had agreed a $1.037bn (C$1.369bn) sale of non-core oil and gas properties in Western Canada to Tourmaline Oil Corp.

Tourmaline, which said the assets might typically be worth C$2.3bn, described the deal as “a major step in the company's ongoing plan to not only become Canada’s, but also one of North America’s, largest, lowest-cost and most profitable natural gas and liquids producers."

Shell said the deal marked progress towards its planned $30bn divestment target; earlier this week its upstream chief Andy Brown said in London that worldwide Shell has put 16 assets on the market, each worth over $500mn.

Shell upstream chief Andy Brown (Photo credit: Shell)

Shell will be paid $758mn cash and Tourmaline shares worth $279mn under this deal, expected to close in 4Q 2016. It comprises 61,000 net acres in the Gundy area of northeast British Columbia, and 145,000 net acres in the Deep Basin area of west central Alberta. Assets are a mix of developed and undeveloped lands, plus related infrastructure, producing 24,850 barrels of oil equivalent (boe)/day of dry gas and liquids.

“Shell retains a significant shale position in Canada and we are actively working to mature our attractive core asset base in the Montney and Duvernay,” said Brown October 20. The super-major retains 218,000 net acres in the Montney gas play of northeast British Columbia and 430,000 net acres in the Duvernay liquids play of Alberta. Meanwhile it also retains a large shales portfolio focused in the US (Marcellus/Utica) and Argentina (Vaca Muerta) which it said will be matured as a growth option for beyond 2020 of long-term potential.

Production from Shell’s Americas shales portfolio, excluding the divested assets in this release, is approximately 250,000 boe/d. Included in the deal is Shell Canada’s infrastructure consisting of three 100%-operated gas plants, with a combined estimated processing capacity of 200-225mn ft³/d.

Tourmaline expects its 2017 average production to be 225,000 boe/d before, and 260,000 boe/d after, the acquisition – in both cases 84% gas – rising to 260,000 and 320,000 boe/d respectively (83% gas) in 2018. It is undertaking a private placement of some shares in order to part-fund the Shell deal.

Mark Smedley