Royal Dutch Shell (LON:RDSA) is set to receive a cash-and-debt $2.2-billion payment as part of the split of its refining joining venture Motiva with Saudi Aramco. The two companies announced plans to divide the venture’s assets last year, with the Anglo-Dutch group looking to integrate its downstream operations in the US.
Shell’s share price has climbed into positive territory in today’s session, having added 0.51 percent to 2,149.50p as of 14:10 GMT, slightly outperforming the benchmark FTSE 100 index which currently stands at 7,350.17 points, flat in percentage terms. The group’s shares have gained more than 28 percent over the past year, but have given up some four percent in the year-to-date.
Shell announced today that it had signed binding definitive agreements with Saudi Aramco on the separation of assets, liabilities and businesses of their refining joint venture Motiva. As part of the deal, Aramco will make a $2.2-billion balancing payment to the Anglo-Dutch oil giant, including assuming Shell’s $1.5-billion share of the venture’s net debt, and a cash payment for the balance.
The two companies announced their decision to break up Motiva about a year ago, with the Anglo-Dutch group assuming sole ownership of the venture’s two smaller refineries in Louisiana where the FTSE 100 group operates a chemicals plant. Saudi Aramco meanwhile will retain the Motiva name and take control over the venture’s flagship refinery in Texas.
The Telegraph quoted analysts at Barclays Capital as commenting today that Shell’s primary reason to separate the assets was not to reduce net debt but rather to increase profitability.
“The separation will provide Shell with much greater control and flexibility of its crude and product slate, as well as resulting in greater integration with the rest of its downstream assets in North America,” the bank said.