Last updated: November 5, 2010 11:04 pm

Shell sells Gulf of Mexico wells for $450m

Royal Dutch Shell is selling its holdings in six oil and gasfields in the Gulf of Mexico for $450m (£278m) as the Anglo-Dutch company continues its disposal programme of non-core assets.

The deal, announced on Friday, is part of Shell’s plans to divest between $7bn and $8bn in assets by the end of next year.

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The company will retain extensive interests in the Gulf of Mexico.

“We are focusing our investment on the most promising growth opportunities and that means selling some fields that no longer fit our strategy,” said Marvin Odum, director of Shell’s upstream Americas division.

Shares in Shell fell 4p to close at £20.50 in London trading.

The company is selling the stakes to W&T Offshore, an independent Houston-based oil and gas producer focused on the Gulf of Mexico. The fields contain about 27m barrels of oil equivalent.

However, the divestment does not signal any significant major reduction in Shell’s commitment to the area, which has come under scrutiny since the oil spill at BP’s Macondo well in April.

Analysts at Evolution Securities said the deal was another example where “the selling down of peripheral assets can realise significant amounts of cash for relatively little loss of reserves and production”. In the case of Shell, the loss in output is just 18,000 barrels of oil equivalent per day, they said.

Shell is among a number of oil majors, including BP, which are selling non-core assets in a move to improve the quality of their reserves portfolio and increase investment in exploration.

After the sale Shell will still have assets in the Gulf of Mexico that produce about 210,000 barrels per day.

Last week, the company decided to invest in the Mars B project – also in the Gulf of Mexico – in which BP will be a minority partner. Shell is hoping to pump 100,000 barrels of oil per day from the well when it comes on stream.

The stakes being sold include a pipeline and three Shell-operated fields in which the group holds stakes of between 64 and 100 per cent.

They also include two fields where Shell is not the principal operator, but in which it has stakes of 11.5 per cent and 25 per cent.

In one field, Shell has only a 6.25 per cent royalty interest.

The company has divested $30bn of assets in the past five years.

“With the production from these assets weighted about 37 per cent towards oil on a volume equivalent basis, we can benefit from today’s high oil prices, while the reserves are predominately natural gas which should provide longer-term upside,” said Tracy Krohn, chairman and chief executive of W&T.

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