Shell has completed the sale of The Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance, as announced 16 January 2024.

The divestment of SPDC aligns with Shell’s intent to simplify its presence in Nigeria through an exit of onshore oil production in the Niger Delta and a focus of future disciplined investment in its Deepwater and Integrated Gas positions.

Renaissance now controls SPDC’s 30% stake in the SPDC JV, an unincorporated joint venture with the government-owned Nigerian National Petroleum Corporation (55%), Total Exploration and Production Nigeria Ltd (10%) and Agip Energy and Natural Resources (Nigeria) Limited (5%). 

Background:

• The SPDC JV holds 15 oil mining leases for petroleum operations onshore and 3 for petroleum operations in shallow water in Nigeria. It is operated by SPDC. 
• Renaissance is formed of ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin. 
• On December 31, 2022, SEC proved reserves that are the subject of this transaction were approximately 458 MMboe. 
• The consideration payable to Shell as part of the transaction is US$1.3bln. 
• The buyer will make additional cash payments to Shell of up to US$1.1bln, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at completion of the transaction. 
• The amounts above will be adjusted to reflect any shareholder distributions, above US$200 million, made prior to completion. Other contingent payments, including those related to gas supply to NLNG, may become payable depending on business performance and fluctuation of product prices. 
• The net book value of the entity subject to this transaction is approximately US$2.8bln as at December 31, 2023. Under the agreed deal structure, economic performance accrues to the buyer with effect from December 31, 2021 (the effective date). However, Shell will continue to consolidate SPDC until control transfers at completion. Although any amounts will depend on the future financial performance of the business, we expect to recognise impairments in respect of the business up to the date of completion, including to the extent that the net book value of SPDC exceeds the expected consideration at completion. 
• At closing, Shell will provide secured term loans of up to US$1.2bln, to cover a variety of funding requirements. 
• Shell is providing additional financing of up to US$1.3bln over future years to fund SPDC’s share of the development of the SPDC JV’s gas resources to supply feedgas to NLNG, and its share of specific decommissioning and restoration costs. This additional financing will only be drawn down when these costs are approved and incurred by the SPDC JV. 

Shell has three other main businesses in Nigeria that are outside the scope of this transaction: 

• Shell Nigeria Exploration and Production Company Limited (SNEPCo), which produces oil and gas in the deepwater Gulf of Guinea;
• Shell Nigeria Gas Limited (SNG), which provides gas to domestic industrial and commercial customers; and
• Daystar Power Group, which provides integrated solar power to commercial and industrial business across West Africa.
• In addition, Shell holds a 25.6% interest in NLNG, which produces and exports LNG to global markets. Shell’s interest in NLNG is also outside the scope of this transaction.

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