* Shell to cut stake in Woodside to 4.5 percent
* Woodside to buy back $2.69 bln worth of shares
* Shell to focus on Gorgon, Prelude LNG in Australia
* Woodside says deal has no impact on growth options (Adds details on Shell's divestment)
By Sonali Paul
MELBOURNE, June 17 (Reuters) - Royal Dutch Shell launched a long-anticipated sale of most of its stake inAustralia's Woodside Petroleum Ltd on Tuesday, lookingto reap about $5.7 billion as it moves to focus on developingits own gas assets in Australia.
The share disposal brings the Anglo-Dutch oil major closerto its goal of shedding $15 billion of assets as part of a driveto cut spending and streamline operations following a profitwarning in late 2013.
The selldown, which reduces Shell's holding to 4.5 percentfrom 23.1 percent, removes uncertainty that has weighed onWoodside's share price since Shell sold a third of its stake in2010 and flagged it was not a long-term holder.
As part of the deal, Woodside will buy back and cancel halfthe shares that Shell is selling, which Australia's toppetroleum producer said would effectively boost its earnings pershare by 6 percent.
"It's probably good. It removes the overhang and gets rid ofa lazy balance sheet and they can get on with life," PenganaCapital portfolio manager Tim Schroeders said.
The reduction in Shell's stake marks a milestone in a longretreat from a company that it had tried to take over in 2001.That deal was ultimately blocked by the Australian governmentafter Woodside argued that Shell may focus on offshoredevelopments at the expense of Australian projects.
The sale, which came the week Woodside's stock hit athree-year high, had been expected this year after Shell ChiefExecutive Ben van Beurden took the helm in January, outliningplans to sell $15 billion of assets in 2014-15.
So far, Shell has sold or put on the block around $12billion of assets in Australia, Europe, Nigeria and NorthAmerica.
Like other oil majors, Shell is under pressure frominvestors to cut soaring costs and increase profit distributionvia dividends and share buy-backs. Some investors have predictedthe asset sales target will rise as it looks unambitiouscompared to BP's asset sales of around $50 billion.
Shell said it would focus efforts in Australia on its 25percent stake in the massive Gorgon liquefied natural gas project and its Prelude floating LNG project, and had optionsfor further LNG growth in Australia, Indonesia and NorthAmerica.
"It doesn't change our view of Australia as an importantplayer on the global energy stage, or Shell's central role inthe country's energy industry," van Beurden said in a statement.
WOODSIDE CONCERNS
Under the deal, Woodside will spend A$2.86 billion ($2.69billion) to buy back 78.3 million of its shares from Shell forA$36.49 a share, which it was able to fund easily after pullingout of a planned investment in Israel's Leviathan gas project.
Shell will also sell a further 78.3 million shares toinstitutional investors for A$3.24 billion, or A$41.35 a share,a 3.5 percent discount to Woodside's last traded share price.
Woodside's shares were on a trading halt on Tuesday, pendingthe completion of the share sale to institutions.
Goldman Sachs and Citi won the coveted role of running thesale. Woodside was advised by Gresham Partners.
While welcoming Shell's selldown, investors remainedconcerned about Woodside's lack of near-term growth options, asthe company is about a year away from signing off on any new LNGprojects, and potential acquisitions are seen as too expensive.
"On balance it's a pretty good deal, but it doesn't createvalue or change the value of the company longer-term," said ananalyst, who declined to be identified as he is not authorisedto speak to the media.
Woodside CEO Peter Coleman said the company was continuingto look for ways to expand its exploration work while alsoevaluating potential acquisitions, and would have a strongenough balance sheet to pursue growth even after the buyback.
"This doesn't in any way affect our capacity to pursue anyof those or complete a transaction if one was attractive," hetold analysts and reporters on a conference call.($1 = 1.0639 Australian dollars) (Reporting by Sonali Paul; Additional reporting by Byron Kayein Sydney and Ron Bousso and Dmitry Zhdannikov in London;Editing by Paul Tait, Edwina Gibbs and Dale Hudson)
