Shell sell out of UK North Sea.

[Dod1010]

As a shareholder in Shell I am pleased that they are being proactive in getting out of less efficient areas, but they still have a significance in the North Sea. Sentiment has no part though because I would like them to do what it takes to protect my dividend! This sort of thing will help.

Dod

[youfoolishboy]

Not seeing the vote of confidence in the N Sea either, selling to small operators who are going to cut costs to make profits. I would not like to be one of the 400 Shell staffies transferred over to the new owners not a good time to be looking for a job in Aberdeen.

[youfoolishboy]

I missed that bit - 400 staff guys? I imagined these days most of Shell's actual operations were subbed to third parties. My guess is that quite a few staff guys will be very well positioned for a big redundancy hand out, a full pension and a guaranteed salaried position with the new operators. In a previous life we used to refer to such guys as "double dippers". I agree, the short term out look for Aberdeen jobs is dire.

Words are ...
On completion, around 400 staff are expected to transfer to Chrysaor, subject to a detailed scoping exercise and staff consultation, on their existing terms and conditions of employment.
Which I think is management speak for you are all getting paid too much and some of you are leaving the rest are getting pay cuts. Nobody is buying Shell assets expecting to make money on the costs they were run at previously so cuts need to be made staff is one obvious one considering the employment situation in Aberdeen staffies will thank then for allowing them to stay even with less pay I suggest.

[Nimrod103]

No, that's not going to happen. When Shell and other majors sell assets, for the staff long servers, it is like winning the lottery, particularly if you are over 55. Severance pay off, enhanced pension and a salary with the new employer. T&C's remain unchanged for three years when you are tupe'd to the new employer. After that, for sure anything goes, as demonstrated by INEOS at Grangemouth. They came within a millimetre of closing the refinery until the unions caved in. I've been in this position a number of times in my career both directly involved and as a close bystander. Believe me, the Shell guys are laughing all the way to the bank. For youngsters, it is a different picture entirely.

Agreed, this is absolutely right. I was in this position once.
This deal is just Shell catching up with what BP and the Americans did years ago, IMHO. And rationalizing their portfolio after the BG takeover.
Big companies need big profitable projects to maintain growth, and the N Sea is really 'stripper' production from now on. It also disaccociates Shell from the abandonment problems, unless the Government lets the companies leave the steel out in the N Sea.

[CaledoniaMan]

Just looking at the numbers.

Aquisition cost $3bn for 350m 2P barrels works out at $8.50/bbl

Current unit operating cost under $15/bbl expected to reduce further under Chrysaor

Abandonment estimated at $3.9bn over the next 30 years with shell covering the first $1bn. Say another $8,50/bbl

Abandonment might have some margin for error but at these numbers and oil a oil price of $55, this still leaves a healthy $23/bbl upside.

It seems quite a low selling price and I am wondering what Shell's expectation was at the outset. Interesting to note that they also loaned Chrysaor $400m to help finance the deal.

[youfoolishboy]

Just looking at the numbers.

In my experience that hides a large cost that the buying company only finds out when they start to use the assets the fact they have been poorly maintained for a few years before sale and there is a large cost involved in upgrading the assets. The ones I was worked on the refurbs for whilst in Aberdeen scared me at the low level of maintenance that had been done I was even told not to look too closely at certain parts of one rig incase I found something more that had to be added to the refurb.

https://www.ft.com/content/ed241136-cab ... 66e967dd44

'Some are worried, though, that as companies struggle financially, corners will be cut once again. Figures compiled by Oil & Gas UK and seen by the FT show that the backlog of maintenance to “safety critical equipment” in the industry — as measured by the companies themselves — has quadrupled since 2009.'

[Nimrod103]

Current unit operating cost under $15/bbl expected to reduce further under Chrysaor

I'm not an oilfield economist, but wouldn't that figure rise significantly as oil prod declines and water cut increases?

[CaledoniaMan]

youfoolishboy wrote:

In my experience that hides a large cost that the buying company only finds out when they start to use the assets the fact they have been poorly maintained for a few years before sale and there is a large cost involved in upgrading the assets. The ones I was worked on the refurbs for whilst in Aberdeen scared me at the low level of maintenance that had been done I was even told not to look too closely at certain parts of one rig incase I found something more that had to be added to the refurb.

Shell only operated 3 of the 10 assets sold so even if they wanted to run the maintenance spend down they would have to take the likes of operators BP, Nexen, Conoco & Apache along with all the other partners with them. Also you would expect the DD process to look at historic OPEX spends and the necessary allowances made.

Nimrod103 » February 2nd, 2017, 8:22 am

I'm not an oilfield economist, but wouldn't that figure rise significantly as oil prod declines and water cut increases?

Point taken but the main point I was trying to make was that there is a lot of headroom left by the surprisingly low acquisition price to absorb such cost increases.

[dspp]

Some other reasons for the low price ......

Or possibly that they expect operating costs to rise due to non-asset-specific factors in North Sea.

Or possibly that they expect a low oil price regime during the earlier part of the coming years.

Or that there were very fewer bidders.

Or that there is very little upside in these reservoirs.

Or combinations of these.

just thoughts, regards, dspp

[youfoolishboy]

Shell only operated 3 of the 10 assets sold so even if they wanted to run the maintenance spend down they would have to take the likes of operators BP, Nexen, Conoco & Apache along with all the other partners with them. Also you would expect the DD process to look at historic OPEX spends and the necessary allowances made.

The article I quoted from the FT claimed all operators were massively underspending on maintenance. I have also have experience of 2 of those operators and can safely say they would be cutting back on anything given the chance. Fact is nobody has been spending much in the North Sea for years.

[petroleum1]

"Shell said it was leaving oil and gas operations in as many as 10 countries, while focusing more heavily on gas-rich Australia and shale opportunities in the United States."

http://www.upi.com/Energy-News/2017/02/ ... 27/?spt=su