Saudi Aramco and Shell achieve significant milestone toward separation of Motiva assets
Mar 6, 2017
Saudi Aramco and Shell announce the signing of binding definitive agreements on the separation of assets, liabilities and businesses of Motiva Enterprises LLC
Signing of binding definitive agreements on the separation of Motiva
The Hague - Royal Dutch Shell plc ("Shell") today announces the signing of binding definitive agreements between SOPC Holdings East LLC (a U.S. downstream subsidiary of Shell) and Saudi Refining Inc. ("SRI") (a wholly owned subsidiary of Saudi Arabian Oil Company (“Saudi Aramco”)) on the separation of assets, liabilities and businesses of Motiva Enterprises LLC (“Motiva”), a 50/50 refining and marketing joint venture.
A balancing payment of $2.2 billion has been agreed between the parties, subject to adjustments including for working capital. This value will be satisfied by a combination of SRI assuming more than its 50% share of Motiva’s net debt on completion and a cash payment for the balance. As at 31 December 2016, Motiva’s total net debt was $3.2 billion, of which Shell will assume $0.1 billion, resulting in a deduction to the cash portion of the balancing payment of $1.5 billion. As a result of the transaction no material effect is expected on gearing reported on the Shell balance sheet.
Subject to regulatory approval, the transaction is expected to close in the second quarter of 2017.
Shell Media Relations
International +44 207 934 5550
Americas +1 713 241 4544
Shell Investor Relations
Europe + 31 70 377 4540
North America +1 832 337 2034
Note to editors
The transaction described in this news release was announced earlier today in a joint release by Saudi Aramco and Royal Dutch Shell. This additional release is to supplement the joint announcement with information specific to Shell’s business interests.
Saudi Aramco and Shell achieve significant milestone toward separation of Motiva assets
Houston - Saudi Arabian Oil Company ("Saudi Aramco") and Royal Dutch Shell plc ("Shell") announce today the signing of binding definitive agreements between Saudi Refining, Inc. ("SRI") (a wholly owned subsidiary of Saudi Aramco) and SOPC Holdings East LLC (a U.S. downstream subsidiary of Shell) on the separation of assets, liabilities and businesses of Motiva Enterprises LLC (“Motiva”).
This step marks a major milestone toward closing the transaction. Subject to regulatory approval, the transaction is expected to close in the second quarter of 2017.
Abdulaziz Al-Judaimi, Senior Vice President of Downstream, Saudi Aramco, said: “This transaction is well aligned with Aramco’s global downstream strategy. Motiva is a strong competitor among U.S. refiners, and we value this important link with the dynamic U.S. energy sector. Our intent is to continue providing Motiva with strong financial support as it transitions into a stand-alone downstream affiliate. We have a long history with the Motiva team, and we’re proud of the impressive strides they have made in recent years toward building on the company’s core strengths.”
John Abbott, Shell Downstream Director, said: “A simplified, integrated business structure will emerge from this deal for us in the United States and that’s consistent with the stated goal of making Shell a world-class investment opportunity. We have today created a set of assets that plays to our strengths. This portfolio upgrade will increase optionality and strengthen Shell’s Downstream business.”
The discontinuation of the joint venture and redistribution of the assets allows each company to focus its downstream business. Per the terms of the non-binding letter of intent the partners signed in March 2016, both companies have evaluated options and through constructive and successful negotiations selected an optimal deal structure to divide and transfer Motiva Enterprises LLC’s assets, liabilities and businesses between the companies. The final negotiated transaction includes the following:
- SRI will assume full ownership of the Motiva Enterprises LLC name and legal entity, including the refinery at Port Arthur, Texas and 24 distribution terminals. Additionally, Motiva will have the right to exclusively sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, D.C., as well as the eastern half of Texas and the majority of Florida.
- Shell will assume sole ownership of the Norco, La., refinery (where Shell operates a chemicals plant), the Convent, La., refinery, 11 distribution terminals, and Shell-branded markets in Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle, and the North-eastern region of the U.S. These assets will be fully integrated with Shell’s downstream business in North America.
Dan Romasko, Motiva President and CEO, said: “We are nearing completion of our preparations to support stand-alone operations upon transaction close. As always, we remain focused on safe and profitable operations and serving our customers exceptionally well.”
Both Motiva owners are fully committed to supporting the venture during this period of transition and assuring excellent customer service and continued health, safety and environmental performance. Owner financing support arrangements for Motiva will remain in place throughout the transition, and both parties are committed to maintaining Motiva’s balance sheet strength and liquidity.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this announcement “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This announcement contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. There can be no assurance that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this announcement. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2015 (available at www.shell.com/investor and www.sec.gov). These risk factors also expressly qualify all forward looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, March 6, 2017. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.
We may have used certain terms, such as resources, in this announcement that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov