Money News

Shell sells stake in Gulf of Mexico field for $965 million

(Reuters) - Royal Dutch Shell on Thursday agreed to sell its 22.45 percent stake in the Caesar Tonga field in the Gulf of Mexico for $965 million in cash to a subsidiary of Israeli energy conglomerate Delek Group.

FILE PHOTO: A Shell sign at one of the oil major's petrol stations in Ulm, Germany, April 6, 2017. REUTERS/Michaela Rehle/File Photo

Located in the Gulf of Mexico, 300 km south of Louisiana, the field’s current production rate is 71,000 barrels per day of oil equivalent, with 90 percent of the output being oil.

The Caesar Tonga field has 30 more years of life and assuming no change in the rate of production, Delek’s interest reflects 78 million barrels of oil equivalent reserves, Delek, Israel’s government-owned gas retailer, said.

As part of the deal, Delek will sign a long-term agreement with a Shell affiliate to purchase oil produced from the field for 30 years at either market prices or prices matched to third-party offers.

Delek Chief Executive Asaf Bartfeld said the deal, along with exploration in the North Sea and the Gulf of Mexico, would boost its position in the international energy market.

Shell said the deal was likely to close by the end of the third quarter and the latest stake sale would contribute to its ongoing divestment programme.

The Anglo-Dutch oil company last year sold its Danish upstream business to Norwegian Energy in a deal valued at $1.9 billion.

Shell reported a sharp rise in cash generation in 2018 and said in January it would stick to spending discipline this year even as it looks to divest around $5 billion a year.

Its 2018 profit jumped by more than a third to $21.4 billion, the highest since the 2014 oil market downturn.

The deal for Caesar Tonga is subject to the right of refusal by Anadarko Petroleum Corp, Equinor ASA and Chevron Corp, which own the rest of the field.

Reporting by Tanishaa Nadkar in Bengaluru; editing by Patrick Graham, Arun Koyyur and David Evans