Contrary to reports by another newspaper that Royal Dutch Shell had left T&T in 1974, Europe's largest integrated oil company has said it is celebrating 100 uninterrupted years in T&T.
In a series of e-mails to the Business Guardian between March 5 and 8, on the acquisition of Repsol's stake in Atlantic (formerly Atlantic LNG), RD Shell's senior spokesman Jonathan French said: "Shell is very pleased to grow its portfolio in T&T, where this year we are celebrating 100 years of uninterrupted activity. We have no doubts that our long history and experience in the country, the strong relationships we have with the people and our global track record in joint venture operations will allow us to succeed in this exciting new line of business."
Asked to clarify the significance of the deal, he said: "We are simply taking over Repsol's stake in an ongoing business. We've certainly not given any impression other than this, so I'm not sure where the media interpretation you refer to has come from. As you know, we already run the lubricants blending plant in Point Lisas, which employs about 60 people, and our lubricants products are distributed from there to the wider Caribbean and Central America."
Asked if he could confirm a February 27 New York Times report that said RD Shell will now "be able to supply customers in Latin America from Trinidad rather than from Nigeria as it does now, and can then send its Nigerian gas to Asia, saving freight and earning higher profit margins," the spokesman said Shell does not discuss liquefied natural gas (LNG) export destinations.
On February 26, Repsol announced a US$4.4 billion (3.38 billion euros) sale of its LNG business to RD Shell, giving Shell control of Repsol's stake in Point Fortin-based Atlantic, one of the largest LNG exporters in the world.
"This is hugely significant news for Repsol and will likely be received positively by the market. It is also a large deal for RD Shell albeit we see a neutral reaction from investors as the market struggles to understand the price paid and possible synergies for the company.
"We see a positive read across for significant LNG-exposed players, such as BG Group, given the implied underlying asset valuation of this deal, including some common portfolio positions such as Trinidad LNG (Atlantic)," said Jason Kenney, head of pan-European oil and gas equity research at Spain's Santander Investments.
He said the deal implies a net asset value (NAV) of 3.38 billion euros for the assets sold, which, he said, was "comfortably ahead of most expectations." The estimated value (EV) for the deal is US$6.7 billion (5.15 billion euros) assuming the leases and debt are all considered as debt, he said. As part of the deal RD Shell also took on Repsol's leases and debt associated with its LNG business.
Repsol has said its net debt is to shrink by almost half to 2.2 billion euros on the back of this deal, which should afford credit rating agencies to become much more comfortable with Repsol's balance sheet and gearing outlook, Kenney said.
Santander had anticipated circa 2.8 billion euros NAV on an ex-Canaport basis and "we are happy to see the robust price paid at 3.38 billion euros," Kenney said.
"Admittedly we had hoped for slightly larger debt removal (assuming 4.4 billion euros for the whole asset base, made up of 1 billion euros on balance sheet debt and 3.4 billion euros off balance sheet debt). However we applaud the still significant de-leveraging impact that the offloading of some 1.73 billion euro debt will have for Repsol's gearing."
Despite the robust price paid, Santander said it views this deal as "neutral for RD Shell given that it has the financial flexibility (and gearing head room) to absorb the debt, and will likely see material synergies with its current global LNG and global trading operations.
RD Shell has stated the newly-acquired portfolio is expected to immediately provide additional cash flow to the company, with limited ongoing capital expenditure requirements." Aleem Khan
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