PERTH (miningweekly.com) – Global energy firm Royal Dutch Shell announced on Tuesday the sale of about 156.5-million shares in Australian oil and gas producer Woodside Petroleum, valued at about $5-billion on an after-tax basis.

The sale, which represents 19% of Woodside’s issued share capital, is through an underwritten sell-down to equity market investors and a selective share buy-back by Woodside. 

Shell CEO Ben van Beurden said that selling down its Woodside stake did not change the group’s view of Australia as an important player on the global energy stage. “Today’s announcement is part of our drive to improve Shell’s capital efficiency and to focus our Australia growth in directly-owned assets,” he commented in a statement.

Australia is set to underpin Shell’s next tranche of liquefied natural gas (LNG) growth, with the Gorgon LNG project where Shell has a 25% interest and the Shell-operated Prelude Floating LNG project, in which Shell holds a 67.5% interest.

Woodside said that it would spend A$2.86-billion on buying back 78.3-million shares at a price of A$36.49 a share. The sales price represents a 14% discount to the volume-weighted average price of Woodside shares over the five trading days until June 16.

The company would fund the buy-back from a combination of existing cash and debt facilities, and said it was unlikely to impact on its current credit rating.

The buy-back price included a capital component of $7.95 a share, with the remainder comprising a fully franked dividend.

Shell said the sell-down to institutional investors would be priced at A$41.35 a share, and would be completed by June 18.

With the buy-back and the sell-down, Shell’s interest in Woodside would reduce from its current 23.1% to a maximum of 4.5%.

Woodside CEO Peter Coleman said the combined transactions would deliver value to Woodside shareholders through enhanced earnings a share, cash flow a share and dividends a share.

“This combined transaction is an efficient and disciplined use of capital and creates value for all our shareholders.

“In parallel, it allows us to optimise the company’s near-term capital structure while maintaining the capacity to continue to develop existing projects and make additional investments in new growth opportunities.”

Coleman said that the combined transaction would also increase Woodside’s liquidity in the market and would resolve the uncertainty in relation to Shell’s shareholding, which had existed for several years.

The company would continue to joint venture (JV) with Shell in a number of projects, including the North West Shelf, and the Browse and Sunrise JVs.

The buy-back was subject to shareholder approval and an independent expert providing an opinion that the transaction was fair and reasonable.