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 The share disposal brings the Anglo-Dutch oil major closer to its
goal of shedding $15 billion of assets as part of a drive to cut
spending and streamline operations following a profit warning in
late 2013.
The selldown, which reduces Shell's holding to 4.5 percent from 23.1
percent, removes uncertainty that has weighed on Woodside's share
price since Shell sold a third of its stake in 2010 and flagged it
was not a long-term holder.
As part of the deal, Woodside will buy back and cancel half the
shares that Shell is selling, which Australia's top petroleum
producer said would effectively boost its earnings per share by 6
percent.
"It's probably good. It removes the overhang and gets rid of a lazy
balance sheet and they can get on with life," Pengana Capital
portfolio manager Tim Schroeders said.
The reduction in Shell's stake marks a milestone in a long retreat
from a company that it had tried to take over in 2001. That deal was
ultimately blocked by the Australian government after Woodside
argued that Shell may focus on offshore developments at the expense
of Australian projects.
The sale, which came the week Woodside's stock hit a three-year
high, had been expected this year after Shell Chief Executive Ben
van Beurden took the helm in January, outlining plans to sell $15
billion of assets in 2014-15.
So far, Shell has sold or put on the block around $12 billion of
assets in Australia, Europe, Nigeria and North America.
Like other oil majors, Shell is under pressure from investors to cut
soaring costs and increase profit distribution via dividends and
share buy-backs. Some investors have predicted the asset sales
target will rise as it looks unambitious compared to BP's <BP.L>
asset sales of around $50 billion.
Shell said it would focus efforts in Australia on its 25 percent
stake in the massive Gorgon liquefied natural gas project and its
Prelude floating LNG project, and had options for further LNG growth
in Australia, Indonesia and North America.
"It doesn't change our view of Australia as an important player on
the global energy stage, or Shell's central role in the country's
energy industry," van Beurden said in a statement.
WOODSIDE CONCERNS
Under the deal, Woodside will spend A$2.86 billion ($2.69 billion)
to buy back 78.3 million of its shares from Shell for A$36.49 a
share, which it was able to fund easily after pulling out of a
planned investment in Israel's Leviathan gas project.
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Shell will also sell a further 78.3 million shares to institutional
investors for A$3.24 billion, or A$41.35 a share, a 3.5 percent
discount to Woodside's last traded share price.
Woodside's shares were on a trading halt on Tuesday, pending the
completion of the share sale to institutions.
Goldman Sachs and Citi won the coveted role of running the sale.
Woodside was advised by Gresham Partners.
While welcoming Shell's selldown, investors remained concerned about
Woodside's lack of near-term growth options, as the company is about
a year away from signing off on any new LNG projects, and potential
acquisitions are seen as too expensive.
"On balance it's a pretty good deal, but it doesn't create value or
change the value of the company longer-term," said an analyst, who
declined to be identified as he is not authorized to speak to the
media.
Woodside CEO Peter Coleman said the company was continuing to look
for ways to expand its exploration work while also evaluating
potential acquisitions, and would have a strong enough balance sheet
to pursue growth even after the buyback.
"This doesn't in any way affect our capacity to pursue any of those
or complete a transaction if one was attractive," he told analysts
and reporters on a conference call.
(Reporting by Sonali Paul; Additional reporting by Byron Kaye in
Sydney and Ron Bousso and Dmitry Zhdannikov in London; Editing by
Paul Tait, Edwina Gibbs and Dale Hudson)
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