Shell Sells Russian Retail And Lubricants Business To Lukoil
Shell Overseas Investments B.V. and B.V. Dordtsche Petroleum Maatschappij – subsidiaries of oil and gas supermajor Shell – have signed an agreement to sell Shell’s retail and lubricants business in Russia Shell Neft to Lukoil.
Shell said that the deal includes 411 retail stations, mainly located in the central and northwestern regions of Russia, and the Torzhok lubricants blending plant, around 125 miles northwest of Moscow.
Shell Neft’s retail network consists of 240 sites owned by Shell, 171 sites owned by dealers, and 19 trademark license agreement sites which are out of the scope of this transaction with Lukoil.
“Our priority is the well-being of our employees,” said Huibert Vigeveno, Shell’s Downstream Director. “Under this deal, more than 350 people currently employed by Shell Neft will transfer to the new owner of this business.”
The agreement with Lukoil follows Shell’s announcement in early March of its intention to withdraw from all Russian hydrocarbons in a phased manner and will be carried out in full compliance with applicable laws and regulations.
“The acquisition of Shell’s high-quality businesses in Russia fits well into Lukoil’s strategy to develop its priority sales channels, including retail, as well as the lubricants business,” said Maxim Donde, Lukoil’s Vice President for Refined Products Sales.
According to the supermajor, the sale is expected to be completed later this year, subject to regulatory approval.
To put this into perspective, it is worth noting that Shell stated in April that its withdrawal from Russia would result in $4 to $5 billion of impairments.
The impairment surpasses Shell’s $3.4 billion worth of assets in ventures and downstream operations in Russia. But it pales in comparison to the $25 billion its peer BP could write down from its much larger involvement in Russia.
Later in the same month, Shell started to withdraw staff from its joint ventures with Russia’s Gazprom as it started its plan to exit investments in response to the war in Ukraine.
Regardless of Shell’s fears that it would be hit hard by Russian impairments, the company was able to report ‘strong results in volatile times’ in its first quarter 2022 results statement.
The company posted adjusted earnings of $9.1 billion in the first quarter of 2021, compared to $3.2 billion during the same period last year and $6.3 billion during the fourth quarter of 2021. Income attributable to Shell shareholders was around $7.1 billion, compared to $5.6 billion in the first quarter of 2021 and $11.4 billion in the final quarter of 2021.
Cash flow from operating activities hit $14.8 billion during this year’s first quarter, compared to $8.2 billion in 1Q 2021 and $8.1 billion in 4Q 2021, free cash flow came in at $10.5 billion, compared to $7.7 billion in the first quarter of last year 2021 and $10.7 billion in the final quarter of 2021.
Shell was also able to reduce net debt to $48.4 billion, compared to $71.2 billion in the first quarter of 2021 and $52.5 billion in the fourth quarter of 2021.
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