Royal Dutch Shell plc (“Shell”) completed the acquisition of Repsol S.A.’s (“Repsol”) liquefied natural gas (LNG) portfolio outside North America for a headline cash consideration of $4.1 billion. As part of the transaction, Shell will also assume $1.6 billion of balance sheet liabilities relating to existing leases for LNG ship charters, substantially increasing the shipping capacity available to Shell’s world-class LNG marketing business.
The deal gives Shell an additional 7.2 million tonnes per annum (mtpa) of directly managed LNG volumes. The company’s already diverse and flexible portfolio will be boosted with LNG supply in the Atlantic from Trinidad & Tobago, and in the Pacific from Peru. In addition, it immediately contributes additional cash flow, while requiring limited on-going capital expenditure.
Since the announcement of the transaction in February 2013, certain value adjustments have been made in accordance with the terms of the sales and purchase agreement. These are expected to lead to a net cash purchase price of $3.8 billion (subject to post closing adjustments), compared to purchase price of $4.4 billion announced in February 2013, and balance sheet liabilities of $1.6 billion, compared to $1.8 billion at the initial announcement. This includes the exercise of pre-emption rights of the BBE power plant in Spain by an existing partner as well as other adjustments such as the financial performance of the portfolio and working capital movements since the effective date of 1st October 2012.
The deal closed in 2014. Shell’s capital investment in Q4 2013 will reflect $3.4 billion for this transaction with the remainder of $2.0 billion booked in 2014 of which $1.6 billion is a non cash item relating to finance ship leases.
The transaction will add:
a) Net 4.2 mtpa equity LNG plant capacity, increasing the company’s equity LNG capacity by around 20%, from 22 to 26 mtpa.
- Atlantic LNG trains 1-4; 14.8 mtpa capacity on a 100% basis (20-25% equity per train); operated by Atlantic LNG Company of Trinidad and Tobago.
- Peru LNG 4.45 mtpa capacity, on a 100% basis (acquisition: 20% equity: 100% offtake); operated by Peru LNG Company.
- A fleet of LNG carriers, comprising both long term and short term time charters.
b) 7.2 mtpa of LNG volumes through long term off-take agreements.
c) As part of this agreement, as previously disclosed, Shell has committed to supply around 0.1 mtpa of LNG to Repsol’s Canaport LNG terminal in Canada over a period of 10 years.