Mal­abu Deal: Shell to write down OPL 245 li­cense as pro­duc­tion tanked 7%

Business Day (Nigeria) - - COMPANIES & MARKETS -

The world’s largest oil and gas trader, Shell says it would write down its in­vest­ment in the con­tro­ver­sial Mal­abu OPL 245 off­shore field in Nige­ria, just as it an­nounced that its up­stream seg­ment made a loss of $6.7 bil­lion as pro­duc­tion de­clined by 7per­cent from a year ear­lier to 2.415 mil­lion bar­rels of oil equiv­a­lent per day.

A write down is nec­es­sary if the fair mar­ket value of an as­set is less than the car­ry­ing value cur­rently on the books. The amount to be writ­ten down is the dif­fer­ence be­tween the book value of the as­set and the amount of cash that the busi­ness can ob­tain by dis­pos­ing of it in the most op­ti­mal man­ner.

“The up­stream loss in­cluded a post-tax im­pair­ment charge of $4.7 bil­lion mainly re­lated to un­con­ven­tional shale as­sets in North Amer­ica, as­sets off­shore in Brazil and Europe, and the OPL 245 block in Nige­ria which is at the heart of a bribery court case in Italy,” Shell said.

The OPL li­cense has been at the heart of a pro­tracted lit­i­ga­tion in Italy af­ter pros­e­cu­tors al­leged cor­rup­tion. Shell bought the oil­field along­side an Ital­ian com­pany, Eni, in 2011 af­ter pay­ing $1.3 bil­lion.

The pay­ment was to a com­pany called Mal­abu, which was owned by Nige­ria’s former Oil Min­is­ter Dan Etete. How­ever, Ital­ian pros­e­cu­tors claim that most of the pay­ments were kick­backs to Nige­rian govern­ment of­fi­cials. Pros­e­cu­tors have, there­fore, called for an 8-year pri­son sen­tence for former Eni CEO, Paolo Sca­roni. Both com­pa­nies have been fined $1.04 mil­lion and pros­e­cu­tors seek the con­fis­ca­tion of $ 1.092 bil­lion from the de­fen­dants of the case.

The An­glo-dutch com­pany, avoided its first quar­terly loss in re­cent his­tory, buoyed by boom­ing trad­ing busi­ness, it how­ever an­nounced nearly $17 bil­lion in im­pair­ment charges re­flect­ing a bleak out­look for oil and gas prices.

Shell’s liq­ue­fied nat­u­ral gas (LNG) sales de­clined by 7% in the quar­ter. The In­te­grated Gas divi­sion wrote down $8.2 bil­lion, mainly re­lated to the Queens­land Cur­tis LNG and Pre­lude float­ing LNG op­er­a­tions in Aus­tralia.

The up­stream loss in­cluded a post-tax im­pair­ment charge of $4.7 bil­lion mainly re­lated to un­con­ven­tional shale as­sets in North Amer­ica, as­sets off­shore in Brazil and Europe, and the OPL 245 block in Nige­ria which is at the heart of a bribery court case in Italy.

Shell’s liq­ue­fied nat­u­ral gas (LNG) sales de­clined by 7% in the quar­ter. The In­te­grated Gas divi­sion wrote down $8.2 bil­lion, mainly re­lated to the Queens­land Cur­tis LNG and Pre­lude float­ing LNG op­er­a­tions in Aus­tralia.

Shell’s net debt rose to $77.8 bil­lion and its debt-toe­quity ra­tio, or gear­ing, was up by 2.8% to 32.7% fol­low­ing the im­pair­ments.

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