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Shell Affiliate to Divest Canadian Assets Worth $1 Billion

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Integrated energy major Royal Dutch Shell plc recently announced that its affiliate, Shell Canada Energy, has entered into an agreement to divest around 206,000 net acres of non-core oil and gas properties in Western Canada to local natural gas producer Tourmaline Oil Corp. This sale is expected to garner more than $1 billion.

The 206,000 net acres of developed and undeveloped lands produce approximately 24,850 barrels of oil equivalent per day. These oil and gas properties include 61,000 net acres in the Gundy area of Northeast British Columbia and 145,000 net acres in the Deep Basin area of West Central Alberta. Post divestment, Shell Canada Energy will retain 430,000 net acres in the Duvernay and 218,000 net acres in the Montney.

Per the Anglo-Dutch energy giant, the payment comprises $758 million in cash and Tourmaline shares valued at $279 million. The deal is effective Nov 1 and expected is to close at the end of 2016.

This sale is part of the Shell’s plan to raise around $30 billion from assets sales in the three years through 2018 to help shore up its finances following its mega merger with BG Group. Notably, the merger with BG Group raised Shell’s total debt level to $90.3 billion from $52.9 billion a year earlier.

Tourmaline Oil Corp., on the other hand, expects to become one of the largest, lowest cost and most-profitable natural gas and liquids producers in both Canada and North America with this acquisition.

ROYAL DTCH SH-A Price

 

Headquartered in Hague, the Netherlands, Shell is one of the largest integrated oil and gas companies in the world. It explores for and extracts crude oil, natural gas and natural gas liquids. It has interests in chemicals as well as power generation and renewable energy.

Shell currently carries a Zacks Rank #2 (Buy), which implies that the stock will outperform the broader U.S. equity market over the next one to three months.

Some better-ranked players in the broader energy sector include Enviva Partners, LP (EVA - Free Report) , Ultra Petroleum Corp. and CONE Midstream Partners LP . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Enviva Partners posted an average positive earnings surprise of 0.19%.

Ultra Petroleum, on the other hand, posted an average positive earnings surprise of 65.91% in the last four quarters.

In the current quarter, CONE Midstream Partners posted a positive earnings surprise of 19.38%.

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