LONDON (AP) " Royal Dutch Shell agreed Tuesday to sell stakes in 10 North Sea oil fields to smaller rival Chrysaor for as much as $3.8 billion as it dumps assets to refocus its business in an era of lower oil prices.
The assets produced 115,000 barrels of oil equivalent a day last year, more than half the 211,000 barrels generated by Shell's North Sea operations, the company said.
The transaction illustrates changes taking place in the North Sea, where declining production and lower oil prices have forced companies to rethink investments. Shell, which helped pioneer the region, is now looking to areas such as Russia and the Gulf of Mexico.
Chrysaor, founded in 2007, says it has identified ways to "maximize economic recovery" and extend the life of the assets it is buying.
"We intend to create a U.K. champion, with the skills and resources of a major independent oil and gas company, to help ensure that the basin's future potential is realized safely, profitably and in alignment with the government's policy of driving investment and maximizing economic recovery," Chrysaor Chief Executive Phil Kirk said in a statement.
While the assets involved in the transaction account for about 2 percent of Shell's reserves of oil and gas, they will more than double Chrysaor's reserves to more than 600 million barrels of oil equivalent.
Some 400 employees are expected to transfer to Chrysaor as part of the deal.
Chrysaor will initially pay $3 billion for the Shell assets, with additional payments of as much as $780 million depending on oil prices and production from the fields. Shell will retain the responsibility to pay $1 billion toward decommissioning the oil fields.
"Some of the majors and super majors have big appetites; they have to develop big new things to fill them," said Michael Tholen, upstream policy director at Oil & Gas UK, an industry association. "It doesn't mean that the company buying those assets are buying the last crumbs at the table."
Brent crude, the benchmark for international oil, dropped to 12-year lows below $30 a barrel early last year amid slowing economic growth in China and increased production in the U.S. That's down from more than $100 a barrel as recently as September 2014. Prices have recovered somewhat, with Brent back above $50 a barrel.
Shell is facing additional pressure following its $52.6 billion takeover of BG Group Plc last year. That deal increased Shell's proven reserves by 25 percent, but critics questioned its logic following the drop in oil prices.
"This deal shows the clear momentum behind Shell's global, value-driven $30 billion divestment program," said Simon Henry, Shell's chief financial officer, adding that the "value here represents a profit against the book values of the assets, and a breakeven oil price above that for the BG acquisition."
This story has been automatically published from the Associated Press wire which uses US spellings