Royal Dutch Shell Plc has decided to offload a roughly $4.1-billion stake in Canadian Natural Resources Ltd (CNRL) that it acquired as part of a deal to retreat from Canada’s oil sands earlier this year, people familiar with the situation told Reuters.
The energy company has been interviewing investment banks to hire a financial adviser for the share sale, four people said in the past week, declining to be named as the discussions are confidential.
The deal could be one of the biggest-ever equity sales in Canada. The largest Canadian equity deal so far was TransCanada Corp’s $4.4-billion offering last year.
Shell and Canadian Natural declined to comment. Canadian Natural shares fell about 1 per cent after the Reuters report and were trading down 2.1 per cent at $41.12 on Tuesday afternoon.
In March, Shell agreed to sell most of its Canadian oil sands assets for $8.5-billion, in a major strategic pullback from the capital-intensive business. As part of the transaction, Shell acquired about 98 million Canadian Natural shares, or about 8.8 per cent of CNRL’s outstanding shares, which are currently valued at about $4.1-billion.
In a deal that saw another global player pulling back from the oil sands, ConocoPhillips in March agreed to sell some of its Canadian assets to Cenovus Energy Inc. As part of the transaction, ConocoPhillips acquired 208 million Cenovus shares, and Conoco now owns 16.9 per cent of issued and outstanding Cenovus common shares.
Shell plans to use the proceeds to help pay down the debt it assumed with the acquisition of British rival BG Group, the people said. The company is weighing whether to sell its Canadian Natural stake in one block or phase it out, the people said.
Shell has sold or agreed to sell more than $20-billion in assets over the past two years to help finance the $54-billion BG acquisition last year. It plans to divest at least $10-billion more by 2018.
The Anglo-Dutch company’s sale of its Canadian oil sand assets was also seen as part of a drive to pull out of some of the most energy-intensive operations as the world switches to cleaner fossil fuel.
While Shell wants to sell the stake as soon as it is able to, no decision has been made about the timing of the sale, the people said. Shell would have to wait until a lockup period for the stake sale expires before it began the process, the people said.
Canadian banks such as Royal Bank of Canada, Toronto-Dominion Bank, Bank of Montreal, Scotiabank and CIBC are among those vying for the mandate, the people said. Global players such as Goldman Sachs Group Inc have also pitched, the people said.
RBC and TD declined to comment. BMO, CIBC, Scotiabank and Goldman did not immediately respond to requests for comment.
Shell is trying to assess if it would take a hit by selling the stake in a chunk, and if so, how much of a hit, one of the people said. The other option is to sell it down gradually, and Shell is figuring out how long that process would take, that person added.
Frontpage November 21, 2019