Royal Dutch Shell Plc bought liquefied natural gas assets for $4.4 billion in cash from Repsol SA as Spain’s largest oil company tries to cut debt and avoid a ratings downgrade to junk.
Shell, the world’s largest LNG supplier, will buy assets including export capacity in Peru and Trinidad and Tobago, the company said in a statement today. Shell assumes some debt as part of the deal. The Canaport terminal in Canada, which imports gas into North America, was excluded from the deal.
Repsol, which will book a $3.5 billion capital gain, is selling assets to keep its investment rating. Moody’s Investors Service cut its rating to one level about junk and gave the company a negative outlook after Argentina seized its YPF business in April without compensation. YPF made up almost half of Madrid-based Repsol’s oil reserves.
“Shell’s world-wide LNG supply position and customer base means we are uniquely positioned to add value to Repsol’s LNG portfolio, including through Shell’s trading capabilities,” said Chief Executive Officer Peter Voser.
Repsol’s regasification plant in Canada, originally part one the assets for sale, was left out of the transaction as its 25-year commitments to ship gas into North America were considered a hurdle to closing the deal, two people familiar with the matter said earlier this month.
Repsol’s contracts through Canaport soured after the extracting of natural gas from shale rock created a glut of the commodity and caused prices to plunge.