Royal Dutch Shell (LSE: RDSB) has announced it is further reducing its investment in Australia’s Woodside Petroleum, which will earn the FTSE 100 oil major US$5bn (£3bn). The sale represents 19% of Woodside’s issued share capital, and is part of a “drive to improve Shell’s capital efficiency and to focus our Australian growth in directly owned assets”, said Shell’s chief executive Ben van Beurden.
Strategic shift
Shell issued a shock profit warning earlier this year after a 44% drop in fourth quarter earnings to around $2.9bn (£1.8bn). Shell is re-evaluating costly operations — having cut upstream spending in the US by a fifth — and is aiming to sell $15bn in assets by the end of next year. The Anglo-Dutch company has already sold its Australian downstream business — including 870 petrol stations — to Vitol for $2.6bn.
The Woodside sale is the biggest deal since van Beurden’s started in the job in January as he tries to deliver better returns for shareholders.
Share performance
Shares in Royal Dutch Shell remained flat at 2,377p during early trade this morning. Analysts expect Shell to deliver earnings per share of 221p in 2014, implying that at current price levels the shares trade on a price-to-earnings ratio of 11.
Of course, the decision to ‘buy’ — based on today’s news, those metrics and your feelings more broadly on Shell’s present strategy — remains up to you.
