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Shell (RDS.A) Divests Alberta Assets to Optimize Upstream Strategy

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Royal Dutch Shell Plc  plans to divest its Kaybob Duvernay assets in Northern Alberta to Crescent Point Energy Corporation (CPG - Free Report) in a C$900-million deal.

The company, through its fully-owned subsidiary Shell Canada Energy, entered an agreement with the Canada-based upstream company Crescent Point to sell its shale operations in Western Canada to further downsize its exposure to the Alberta oilpatch.

Shell will be paid C$550 million in cash and 50 million of Crescent Point shares for selling off drilling rights on roughly 130,000 net hectares of land. Notably, the transaction, which is subject to customary regulatory approvals, is expected to be completed in April 2021.

Shell has been divesting most of its oilsand assets in Canada as the country struggled with transport-related restrictions for several years and most companies diverted interest to valuable assets in other locations. In 2017, the integrated major divested a number of its oil sand leases in Alberta to Canadian Natural Resources Ltd (CNQ - Free Report) as part of a strategic revamp to focus on businesses with sustainable advantages.

The Duvernay shale assets, which include around 450,000 net acres in the Fox Creek and Rocky Mountain areas, generate total production of nearly 30,000 barrels of oil equivalent per day from more than 270 wells. Crescent Point stated that it spotted more than 200 other viable drilling locations on the acquired assets, a large portion of which is unexplored. The company is expected to withhold employees operating on the field and several technical activities that favor the development of the assets.

The divestiture would enable Shell to focus on core productive resources such as the Permian Basin in Texas and New Mexico, and is expected to own 8.6% of Crescent Point common shares once the deal closes. Notably, the divestment of the assets bolsters Shell's attempt to focus on the upstream portfolio to generate cash flow.

Company Profile

Shell is one of the primary oil majors — a group of U.S. and Europe-based big energy multinationals — with global operations. The company is fully-integrated, as it participates in every aspect related to energy from oil production to refining and marketing.

Zacks Rank & Another Stock to Consider

The company currently flaunts a Zack Rank #1 (Strong Buy).

Another top-ranked player in the energy space is Total SE , currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Total’s earnings for 2021 are expected to increase 14% year over year.

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