On May 17,
Deal Rationale
In February 2016, Shell closed a $54 billion merger with BG Group Plc - a leading upstream energy player in the UK. The transaction was completed just weeks after a massive decline in oil prices to a 13 year low of approximately $27 per barrel. Post its merger with BG, Shell’s long-term debt burden increased to the current level of approximately $73 billion, which resulted in lowered credit rating for the company (downgraded to Aa2 from Aa1 by Moody’s in April 2016). Low oil and gas prices are likely to compound Shell’s challenges in the completion of substantial asset sales, hence the company is exploring an IPO of its non-core assets within its upstream business to generate cash. This would enable the company to reduce its gearing and add value to its shareholders through higher dividend payout and share buybacks. An IPO will create better visibility for this business and result in the market assigning the right value for the business.
Organization Structure
Company Description
Royal Dutch Shell Plc (Parent)
Headquartered in Hague, Netherlands, Royal Dutch Shell Plc (NYSE: RDS/A) explores for crude oil and natural gas across the world, both in conventional fields and from sources, such as tight rock, shale and coal formations. The company operates in following segments: Upstream, Integrated Gas, Downstream and Corporate. Upstream segment comprises Shell’s conventional oil and gas business globally, including its deep-water and shales activities and focuses on exploration for new crude oil and natural gas reserves. Integrated Gas comprises manufacturing and distribution of liquefied natural gas (LNG) and gas-to-liquids (GTL) products. Downstream segment comprises refining, marketing activities for oil products and chemicals. Corporate comprises Shell’s holdings and treasury organization as well as its headquarters and central functions.
Baby Shell (Carve-Out)
Baby Shell will likely consist of upstream non-core matured assets in the UK, Norway, New Zealand, Italy and Nigeria. In UK, Shell operates a significant number of interests on the UK
Source: Spin-Off Research