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Shell (RDS.A) to Divest Deer Park Refining to Pemex for $596M

·3 min read

Royal Dutch Shell’s RDS.A subsidiary Shell Oil Company recently inked a deal to divest its 50% stake in Deer Park Refining Limited Partnership to Mexico’s state oil monopoly Pemex.

Notably, Texas-based Deer Park refinery is a joint venture, equally shared between Shell Oil Company and P.M.I. Norteamerica, S.A. De C.V., a unit of Pemex.

The base consideration for the deal is valued at $596 million, which includes cash and debt as well as the value of hydrocarbon inventory. The transaction is slated to close in the fourth quarter of this year upon fulfilling all the necessary conditions and pending approvals. Post completion of the deal, Shell's shareholding in the partnership and hence dull ownership of the refinery will be handed over to Pemex.

Meanwhile, Shell Chemical L.P. will continue to run its completely owned Deer Park Chemicals factory, located adjacent to the property. Shell will be able to focus on its refining footprint even further while keeping integration flexibility and keeping value from its Chemicals and Trading business as a result of this deal.

Employees from Deer Park will be sent to the refinery or the chemical plant. When the agreement concludes, personnel assigned to the refinery assets in expectation of the divestment will be offered jobs by Pemex while workers directed to the chemical plant assets not anticipating any sale will continue to work for Shell.

The crude oil capacity of the Deer Park Refinery is 340,000 barrels per day. Crude oil from Mexico, Canada, the United States, Africa and South America is processed at the refinery. The refinery produces gasoline, aviation fuels, diesel fuels, ship fuel and petroleum coke among other things.

Also, recently, Shell reached an agreement to divest its stake in the Philippines-based Malampaya gas field to Malampaya Energy XP for up to $460 million. Notably, Malampaya Energy XP, which is a subsidiary of Udenna, will acquire an interest in Shell Philippines Exploration (SPEX) from Shell's unit Shell Petroleum. SPEX holds 45% share in the Service Contract 38 (SC38), a deepwater licence that comprises the Malampaya gas field.

About Shell

This integrated energy player belongs to a global group of energy and petrochemical companies. It is involved in all phases of the petroleum industry right from exploration to final processing and delivery. The company recently released first-quarter 2021 earnings results wherein the bottom line came ahead of the Zacks Consensus Estimate by 3.8%.

Zacks Rank & Key Picks

Shell has a Zacks Rank #3 (Hold), currently.  Some better-ranked players in the energy  space are SilverBow Resources Inc. SBOW, Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report
 
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