Short selling pressure and worse…
Iranian oil minister Bijan Zanganeh…
Investors and shareholders are relaxing after Royal Dutch Shell has announced that it will begin selling off assets to try and offset the huge investments it has made in new projects ranging from Australia to Brazil.
Chief Executive Officer Peter Voser has said that the planned divestment will help Shell’s net capital investment for the year to fall from a record $45 billion. Selling oil and natural gas producing assets is possible due to the large number of new projects that are coming online.
“We are entering into a divestment phase like we had a few years ago. The net capital spending is considerably going to come down in 2014. We know exactly what we are going to do.”
Investors have begun to scrutinise the capital spending at many of the world’s largest oil companies as costs of new projects rise, and the price of oil has remained fairly stable offering little hope of growth in revenue.
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Voser dismissed the investors scrutiny saying that tensions with investors over the mix of spending and returns will “always be there and that’s the right tension. But it doesn’t mean we always give in. We slowed down in the late 1990s quite considerably and this actually was one of our biggest regrets strategically, because it took us 10 years to recover.”
Shell predicted that it would make a net capital expenditure of $130 billion from 2012 to 2015, and believes that so far it will have spent a total of $75 billion by January, leaving only a net expenditure of $55 billion for the next two years, however Simon Henry, the Chief Financial Officer, predicts an extra $36 billion spent each year in 2014 and 2015 (totalling $72 billion).
Bloomberg has done the calculations and believes that Shell must sell assets valuing at least $15 billion over the next couple of years in order to have a chance of meeting its financial targets.
Henry hinted that whilst no assets had officially been named for the planned sale, it is likely that Shell will get rid of production assets in Nigeria, the US, and some other regions, along with refineries and retail assets.
Voser explained that they “are particularly rich on upstream options. At the moment the pipeline which we have is richer than we can do.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com