Royal Dutch Shell sells its Wheatstone LNG stake to Kufpec in a 1.14-billion dollar deal

The largest oil company in Europe – Royal Dutch Shell Plc – announced that it has decided to sell its stake in a natural-gas project, which is based in Australia. The deal is estimated to 1.14 billion dollars in cash.

Shell is expected to sell its 8% equity interest in the Wheatstone-lago gas field and its 6.4% interest in the Wheatstone liquefued-natural-gas project to Kuwait Foreign Exploration Petroleum Co., which is also known as Kufpec. This is the first disposal of the oil company after it issued a profit warning last week.

Ben van Beurden, who is the Chief Executive Officer of Royal Dutch Shell, said in a statement, cited by the Wall Street Journal: “Shell will remain a major player in Australias energy industry. However, we are refocusing our investment to where we can add the most value with Shells capital and technology.”

Last Friday the company revealed that the fourth-quarter earnings, which are to be posted by Shell next week, are expected to be 2.2 billion dollars, which is about 70% less than the 7.3-billion-profit posted for the same period of 2012.

Shell also shared that it forecasts a full-year profit of 16.8 billion dollars, which is also weaker than the 27.2-billion-dollar one in 2012. The company also announced that possible job cuts at its Australian Arrow Energy Ltd. unit are being considered. Shell believes that different factors across its businesses, including poor refining margins and increased spending are to blame for the situation.

Rising costs and inability to capitalize on the shale-gas boom in the U.S. have recently influenced not only on Shell, but on the rest of the large oil companies as well. The company said it expects its capital spending to be more than 44 billion dollars in 2013, which is more than 50% compared to Shells spending in 2012.

In the last few years, more oil companies have considered Australia as a particularly expensive place, partly due to its high labor costs. Royal Dutch Shell holds a stake not only in Wheatstone, but also in a natural-gas project called Gordon, as well as in other Australian gas fields. The company said that it does not expect selling its stake to Kuwait Foreign Exploration Petroleum Co. to have an impact on the Wheatstone projects existence.

Sheikh Nawaf Saud Al-Sabah, Chief Executive Officer of Kuwait Foreign Exploration Petroleum Co., said in a telephone call, cited by Bloomberg: “This transaction is consistent with Kufpecs strategy of investing in projects that have strategic tie-ins with the Kuwaiti oil sector.”
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Royal Dutch Shell Plcs shares settled at GBP 2 175.50 on Monday, up 0.05% on the day, and the one-year return rate is up 4.06%.