Shell Sheds 19% Stake in Woodside for $5B – Analyst Blog

Integrated energy behemoth, Royal Dutch Shell plc ( RDS.A ) announced plans to sell a major part of its stake in the Australian petroleum exploration and production company, Woodside Petroleum Limited. The 19% stake sale would garner around $5 billion for Shell and lower its holding in Woodside to under 5%.

The 156.5 million shares sale would take place in two parts, involving selective buyback by Woodside and underwritten sell-down to equity market investors. An affiliate of Shell, Shell Energy Holding Australia Limited, has arranged two investment banks to sell around 9.5% or 78.27 million shares through an underwritten offering at A$41.35 per share, which is expected to close on Jun 18.

Moreover, Woodside would buy back the remaining 78.27 million shares at a price of $34.24 per share - $26.29 per share as dividend component and $7.95 per share as capital component. The buyback is expected to complete in early August.

Shell's management stated that the sale was a means to improve the company's capital efficiency and that it intends to drive growth in Australia through directly owned assets.

The stake sale in Woodside is not a first for the company. Shell had sold around 10% stake in this Australian energy company in 2010 in a $3.3 billion deal, thereby reducing its holding to 24%. However, Shell remains focused on projects in Australia.

Shell is one of the major integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities. The company currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader US market in the next one to three months.

Meanwhile, one can consider better-ranked players from the broader energy sector like TC PipeLines, LP ( TCP ), Ultra Petroleum Corp. ( UPL ) and Encana Corp. ( ECA ). All these stocks sport a Zacks Rank #1 (Strong Buy).

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

ENCANA CORP (ECA): Free Stock Analysis Report

ULTRA PETRO CP (UPL): Free Stock Analysis Report

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Shell Sheds 19% Stake in Woodside for $5B - Analyst Blog