Royal Dutch Shell Plc Sells Woodside Stake for £3bn

Royal Dutch Shell Plc (LON: RDSB) continues to strive to deliver value for shareholders.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 17 June, 2014 9:28 am BST

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Royal Dutch Shell (LSE: RDSB) has announced it is further reducing its investment in Australia’s Woodside Petroleum, which will earn the FTSE 100 oil major US$5bn (£3bn). The sale represents 19% of Woodside’s issued share capital, and is part of a “drive to improve Shell’s capital efficiency and to focus our Australian growth in directly owned assets”, said Shell’s chief executive Ben van Beurden.

Strategic shift

Shell issued a shock profit warning earlier this year after a 44% drop in fourth quarter earnings to around $2.9bn (£1.8bn). Shell is re-evaluating costly operations — having cut upstream spending in the US by a fifth — and is aiming to sell $15bn in assets by the end of next year. The Anglo-Dutch company has already sold its Australian downstream business — including 870 petrol stations — to Vitol for $2.6bn.

The Woodside sale is the biggest deal since van Beurden’s started in the job in January as he tries to deliver better returns for shareholders.

Share performance

Shares in Royal Dutch Shell remained flat at 2,377p during early trade this morning. Analysts expect Shell to deliver earnings per share of 221p in 2014, implying that at current price levels the shares trade on a price-to-earnings ratio of 11.

Of course, the decision to ‘buy’ — based on today’s news, those metrics and your feelings more broadly on Shell’s present strategy — remains up to you.