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Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Analyst Report) has entered into an agreement with Swiss international energy trading giant Vitol Group to sell its Australian downstream assets for approximately A$2.9 billion ($2.6 billion). The transaction – subject to regulatory approvals – is expected to close in 2014.

The to-be-sold properties covers the Anglo-Dutch energy major’s Geelong refinery near Melbourne and its 870 retail outlets, apart from bulk fuels, bitumen, chemicals and a portion of Shell’s lubricants businesses in Australia. However, the scope of the contract does not include the Aviation unit, which will remain with The Hague, Netherlands-based group.

Despite Shell’s decision to part way with its refining assets Down Under, the company maintained that it still remains committed to Australia and the initiative is just part of an effort to streamline its downstream portfolio.

As a matter of fact, for quite some time now, Shell has been looking to improve its performance and remain competitive in this difficult environment by embarking on aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization. The company’s recent decision to sell its refineries in the U.K., Germany, France, Norway and the Czech Republic is part of that strategy.

Royal Dutch Shell is one of the largest integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities.

Shell currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Some better-ranked stocks in the energy sector include Linn Co. LLC (LNCO - Snapshot Report), Warren Resources Inc. (WRES - Snapshot Report) and Range Resources Corp. (RRC - Analyst Report). All these domestic upstream players, with a Zacks Rank #1 (Strong Buy), have seen solid secular growth and harbor the potential to rise significantly from the current levels.

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