Shell offers $7.7 billion (Can.) to buy out Shell Canada

Oct. 23, 2006
Royal Dutch Shell PLC offered to buy the shares that it does not already own in Shell Canada Ltd. in a move aimed at boosting the parent company's stake in oil sands. Shell currently owns 78% interest in Shell Canada. The group offered $40/share (Can.) or $7.7 billion.

OGJ editors
HOUSTON, Oct. 23 -- Royal Dutch Shell PLC offered to buy the shares that it does not already own in Shell Canada Ltd. in a move aimed at boosting the parent company's stake in oil sands. Shell currently owns 78% interest in Shell Canada. The group offered $40/share (Can.) or $7.7 billion.

Shell Canada has a substantial position in Canada's oil sands and is embarking on a major expansion of production and upgrading capacity.

"Canada is an important growth area for the group, and the group will be a major investor in Canada for many years to come," Shell said.

The proposal follows corporate structural changes Shell took last year after a series of reserves reclassifications. Once Shell Canada is fully combined with the group, the business will have a more simplified organization, the group said.

Structural changes came after the company reclassified reserves five times in a little over a year (OGJ Online, Feb. 4, 2005). Royal Dutch Petroleum Co. and Shell Transport & Trading Co. were merged into a single parent, Shell, the stock of which began trading July 20, 2005.

Shareholders approved the unification formally combining the former Royal Dutch/Shell Group's British and Dutch parent companies under a single board and a single executive (OGJ Online, Oct. 28, 2004). Investors had said the old structure hindered transparency and financial accountability.

Shell Canada
In July, Shell Canada announced plans to increase production in the Athabasca tar sands project in Alberta to 550,000 b/d from 150,000 b/d.

Alberta's oil sands contain an estimated 1.69 trillion bbl of bitumen and the produced 5 trillion bbl through 2005. Shell Canada intends to announce a final investment decision for this expansion project in the fourth quarter pending regulatory approvals. Bitumen production is expected in late 2009 followed by upgrader production in late 2010.

The group asked Shell Canada to establish a special independent committee to supervise preparation of a formal independent valuation and to review and make a recommendation regarding the proposed offer.

The group reserves the right not to proceed with the making of an offer if it is unable to obtain Shell Canada support.

A formal offer will be conditional on more than 50% of Shell Canada's outstanding shares, calculated on a fully diluted basis, being tendered. Closing also is subject to other customary conditions.