Shell sells Nigerian onshore subsidiary for $2.4bn

Shell has reached an agreement to sell its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance for $2.4 billion.

Renaissance is a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group.

Shell stated in a statement on Tuesday, January 16, 2024, that the completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions.

“Transaction will preserve SPDC’s operating capabilities for benefit of joint venture

“The transaction has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership. This includes the technical expertise, management systems and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture (SPDC JV). SPDC’s staff will continue to be employed by the company as it transitions to new ownership.

“Following completion, Shell will retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG (NLNG), to help Nigeria achieve maximum value from NLNG.”

Speaking on the development, Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, said: “This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions.

“It is a significant moment for SPDC, whose people have built it into a high-quality business over many years. Now, after decades as a pioneer in Nigeria’s energy sector, SPDC will move to its next chapter under the ownership of an experienced, ambitious Nigerian-led consortium.

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“Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector. We will continue to support the country’s growing energy needs and export ambitions in areas aligned with our strategy.”

The consideration payable to Shell as part of the transaction is $1.3 billion. The buyer will make additional cash payments to Shell of up to $1.1 billion, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at completion of the transaction.

The amounts above will be adjusted to reflect any shareholder distributions, above $200 million, made prior to completion. Other contingent payments, including those related to gas supply to NLNG, may become payable depending on business performance and fluctuation of product prices.

The net book value of the entity subject to this transaction is approximately $2.8 billion as at December 31, 2023. Under the agreed deal structure, economic performance accrues to the buyer with effect from December 31, 2021 (the effective date).

The Star