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TheStreet Open House

Royal Dutch Shell Sells Australian Assets For $2.6B

Stocks in this article: RDS.A

NEW YORK (The Deal) -- Royal Dutch Shell's (RDS.A) $15 billion asset sale continued apace Friday as the company notched its fourth sale in under two months - and its second in as many days - with the A$2.9 billion ($2.6 billion) disposal of its Australian downstream business.

Dutch oil trading company Vitol Group will take over Shell's 870 Australian gas stations, a loss making refinery as well as bulk fuels, bitumen and chemicals operations.

Vitol, which was backed by sovereign wealth fund Abu Dhabi Investment Council, edged out a rival consortium of Macquarie Group Ltd. and Glencore Xstrata plc in an auction of the assets.

Shell and Vitol declined to provide revenue or earnings figures for the Australian assets. "The margins are not great at the moment because of the losses at the refining business but Vitol is confident it can improve performance," said a Vitol spokeswoman. Shell had planned to close the Geelong, Victoria-based refinery if it couldn't find a buyer for the operation.

Rotterdam-based Vitol will seek to bolster its new Australian operation with further acquisitions of distribution assets in Australia, Vitol chief executive Ian Taylor told journalists on Friday. "We will be encouraging local management to come up with plans to expand the business. That is indeed exactly why we bought it," he said.

The deal takes Shell's CEO Ben Van Beurden's disposals to more than $4.7 billion since he took control of the company in January with a commitment to slash capital costs by offloading $15 billion of assets by the end of 2015.

"We are making tough portfolio choices to improve the company's overall competitiveness," Van Beurden said in a statement.

Shell on Thursday announced the sale of its Italian downstream assets, including 830 service stations, to Kuwait Petroleum International for an undisclosed fee. The Hague, Netherlands-based oil company in January sold a 23% stake in a Brazilian exploration block to Qatar Petroleum International for $1 billion and two Western Australian liquefied natural gas projects to Kuwait Foreign Petroleum Exploration Corp. for $1.14 billion. It has also confirmed plans to sell oil rigs in the North Sea and some Norwegian assets.

The deal for the Australian assets is the second between Vitol and Shell in recent years. Vitol teamed with PE shop Helios Investment Partners LLP to acquire an 80% stake in Shell's downstream business in 14 African countries for about $1 billion in Feb. 2011.

Vitol said Friday that it had been assessing a host of assets offered to it by large oil companies, which are selling downstream assets to focus on more profitable exploration operations. It is "a good time to buy," Vitol's Taylor said.

The deal is dependent on regulatory approval, including foreign investment clearance, and is expected to close by the end of 2014.

Separately, Vitol's commodity trading rival Trafigura Beheer BV also announced a deal on Friday, revealing that it had acquired a 30% stake in a Chinese copper smelter operated by Jinchuan Group. Financial terms of the deal were not disclosed but the agreement includes a supply deal that secures Trafigura a 30% share of the smelters' forecast 400,000 tons per year of production. The deal is the first by a trading company in a Chinese copper smelting business, according to Trafigura.

Shares in Shell traded Friday afternoon at 2,202.5 pence ($36.76), up 7 pence, or about 0.03%, on their Thursday close. Vitol, owned by its management and employees, is not listed.

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