Canadian Manufacturing

Shell selling shale assets in Louisiana, Wyoming for US$2.1B

Company said it will also receive drilling rights to shale land in Ohio, Pennsylvania as part of one deal



NEW YORK—Royal Dutch Shell plc has agreed to sell drilling rights in shale formations in Louisiana and Wyoming for US$2.1 billion in two transactions.

In one of the deals, Shell will also receive drilling rights to land in Ohio and Pennsylvania.

Shell is working to focus its onshore drilling program in the United States on a few of the more prolific formations in an effort to boost profitability.

The company wrote down the value of its shale acreage in the U.S. by US$2.1 billion last year amid lower natural gas prices.

Shell will sell its Pinedale acreage in Wyoming to Ultra Petroleum Corp. for US$925 million and 155,000 acres in the Utica and Marcellus shale formations in Ohio and Pennsylvania.

It will sell its Haynesville acreage in Louisiana to Vine Oil & Gas LP and the investment firm Blackstone for US$1.2 billion.

Shell and other major oil and gas explorers regularly sell rights to fields where production is flat or declining.

They then use that cash to fund exploration programs designed to discover new or more prolific fields that oil giants need to fuel growth.

The Pinedale and Haynesville formations produce dry gas, which is less profitable than oil or so-called natural gas liquids, at relatively moderate rates.

The Marcellus shale in Pennsylvania has proven to be an extraordinarily prolific dry gas producer, and profitable for drillers because it produces gas at high rates per well.

The U.S. Energy Department says the formation will produce an average of 15.9 billion cubic feet of gas per day in September, nearly a quarter of total U.S. production.

Ohio’s Utica shale is also proving to be prolific, and it includes a higher proportion of more profitable liquid hydrocarbons.

Utica gas production is expected to rise to 1.3 billion cubic feet per day in September, up nearly eightfold from 155 million cubic feet per day at the start of 2012, according to the Energy Department.

“We continue to restructure and focus our North America shale oil and gas portfolio,” said Marvin Odum, president of Shell’s U.S. division, Shell Oil Co., in a statement. “We are adding highly attractive exploration acreage, where we have impressive well results in the Utica, and divesting our more mature, Pinedale and Haynesville dry gas positions.”

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