* Shell to cut stake in Woodside to 4.5 percent
* Woodside to buy back $2.69 bln worth of shares
* Shell to focus on Gorgon, Prelude LNG in Australia
* Woodside says deal has no impact on growth options
(Adds details on Shell's divestment)
By Sonali Paul
MELBOURNE, June 17 Royal Dutch Shell
launched a long-anticipated sale of most of its stake in
Australia's Woodside Petroleum Ltd on Tuesday, looking
to reap about $5.7 billion as it moves to focus on developing
its own gas assets in Australia.
The share disposal brings the Anglo-Dutch oil major closer
to its goal of shedding $15 billion of assets as part of a drive
to cut spending and streamline operations following a profit
warning in late 2013.
The selldown, which reduces Shell's holding to 4.5 percent
from 23.1 percent, removes uncertainty that has weighed on
Woodside's share price since Shell sold a third of its stake in
2010 and flagged it was not a long-term holder.
As part of the deal, Woodside will buy back and cancel half
the shares that Shell is selling, which Australia's top
petroleum producer said would effectively boost its earnings per
share by 6 percent.
"It's probably good. It removes the overhang and gets rid of
a lazy balance sheet and they can get on with life," Pengana
Capital portfolio manager Tim Schroeders said.
The reduction in Shell's stake marks a milestone in a long
retreat from a company that it had tried to take over in 2001.
That deal was ultimately blocked by the Australian government
after Woodside argued that Shell may focus on offshore
developments at the expense of Australian projects.
The sale, which came the week Woodside's stock hit a
three-year high, had been expected this year after Shell Chief
Executive Ben van Beurden took the helm in January, outlining
plans to sell $15 billion of assets in 2014-15.
So far, Shell has sold or put on the block around $12
billion of assets in Australia, Europe, Nigeria and North
Like other oil majors, Shell is under pressure from
investors to cut soaring costs and increase profit distribution
via dividends and share buy-backs. Some investors have predicted
the asset sales target will rise as it looks unambitious
compared to BP's asset sales of around $50 billion.
Shell said it would focus efforts in Australia on its 25
percent stake in the massive Gorgon liquefied natural gas
project and its Prelude floating LNG project, and had options
for further LNG growth in Australia, Indonesia and North
"It doesn't change our view of Australia as an important
player on the global energy stage, or Shell's central role in
the country's energy industry," van Beurden said in a statement.
Under the deal, Woodside will spend A$2.86 billion ($2.69
billion) to buy back 78.3 million of its shares from Shell for
A$36.49 a share, which it was able to fund easily after pulling
out of a planned investment in Israel's Leviathan gas project.
Shell will also sell a further 78.3 million shares to
institutional investors for A$3.24 billion, or A$41.35 a share,
a 3.5 percent discount to Woodside's last traded share price.
Woodside's shares were on a trading halt on Tuesday, pending
the completion of the share sale to institutions.
Goldman Sachs and Citi won the coveted role of running the
sale. Woodside was advised by Gresham Partners.
While welcoming Shell's selldown, investors remained
concerned about Woodside's lack of near-term growth options, as
the company is about a year away from signing off on any new LNG
projects, and potential acquisitions are seen as too expensive.
"On balance it's a pretty good deal, but it doesn't create
value or change the value of the company longer-term," said an
analyst, who declined to be identified as he is not authorised
to speak to the media.
Woodside CEO Peter Coleman said the company was continuing
to look for ways to expand its exploration work while also
evaluating potential acquisitions, and would have a strong
enough balance sheet to pursue growth even after the buyback.
"This doesn't in any way affect our capacity to pursue any
of those or complete a transaction if one was attractive," he
told analysts and reporters on a conference call.
($1 = 1.0639 Australian dollars)
(Reporting by Sonali Paul; Additional reporting by Byron Kaye
in Sydney and Ron Bousso and Dmitry Zhdannikov in London;
Editing by Paul Tait, Edwina Gibbs and Dale Hudson)