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Shell (RDS.A) to Divest Gabon Oil Assets for $587 Million
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Anglo Dutch oil giant Royal Dutch Shell PLC is paring its African operations, selling assets worth $587 million to Assala Energy Holdings Ltd., which is backed by the global asset manager Carlyle Group L.P. (CG - Free Report) . For Shell, the deal is part of a $30 billion divestment program for 2016--2018.
Details of the Deal
Per the deal, Shell will offload its onshore oil and gas operations and associated infrastructure in Gabon, Africa. The assets include five operated fields, interests in four non-operated fields, a pipeline system and an export terminal. Shell’s trading units will retain the rights to take oil for the next five years.
The buyer, Assala Energy will make an initial payment of $587 million as well as assume a debt of $285 million. It will also make additional payments of $150 million depending on the volatility of oil prices and production rates in the fields. Shell will also report an impairment charge of $53 million after tax in its Q1 earnings report.
Subject to satisfactory closing conditions and approvals, the deal is scheduled for closure in middle of this year.
Objectives of the Deal
The deal takes the $30 billion divestment plans of Shell past the two-thirds mark. The company had sold assets worth $5 billion last year. This year the company has divested more than $15 billion worth of assets including the sale of Gabon properties. The deal provides the company a major uplift in its drive to decrease the debt following the acquisition of BG Group for $47 billion. The acquisition is expected to reduce the company’s cost, enhance cash flow and return to capital. Post the execution of the deal, around 430 employees of Shell would become part of Assala Energy. The move is also in line with the company's aim to upgrade and streamline its portfolio as Shell seeks to concentrate on its core assets in the upstream footprint.
It is expected that the acquisition of Gabon assets, which witnessed production of 41,000 barrels of oil equivalent in 2016, will help in driving output levels for Assala Energy. This will create sustainable growth opportunities and value for stakeholders.
Zacks Rank & Other Stocks to Consider
Headquartered in Netherlands, Shell is one of the largest integrated energy companies and is engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #2 (Buy).
The company outperformed the Zacks categorized Oil & Gas-International Integrated industry over the prior six months. During the aforesaid period, shares of Shell rallied almost 7% while the broader industry gained around 3%.
Crescent Point Energy reported positive earnings surprise in each of the trailing four quarters, the average being 127.16%.
Pioneer Natural Resources is expected to deliver year-over-year growth of 1,118.2% in its earnings in 2017.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Shell (RDS.A) to Divest Gabon Oil Assets for $587 Million
Anglo Dutch oil giant Royal Dutch Shell PLC is paring its African operations, selling assets worth $587 million to Assala Energy Holdings Ltd., which is backed by the global asset manager Carlyle Group L.P. (CG - Free Report) . For Shell, the deal is part of a $30 billion divestment program for 2016--2018.
Details of the Deal
Per the deal, Shell will offload its onshore oil and gas operations and associated infrastructure in Gabon, Africa. The assets include five operated fields, interests in four non-operated fields, a pipeline system and an export terminal. Shell’s trading units will retain the rights to take oil for the next five years.
The buyer, Assala Energy will make an initial payment of $587 million as well as assume a debt of $285 million. It will also make additional payments of $150 million depending on the volatility of oil prices and production rates in the fields. Shell will also report an impairment charge of $53 million after tax in its Q1 earnings report.
Subject to satisfactory closing conditions and approvals, the deal is scheduled for closure in middle of this year.
Objectives of the Deal
The deal takes the $30 billion divestment plans of Shell past the two-thirds mark. The company had sold assets worth $5 billion last year. This year the company has divested more than $15 billion worth of assets including the sale of Gabon properties. The deal provides the company a major uplift in its drive to decrease the debt following the acquisition of BG Group for $47 billion. The acquisition is expected to reduce the company’s cost, enhance cash flow and return to capital. Post the execution of the deal, around 430 employees of Shell would become part of Assala Energy. The move is also in line with the company's aim to upgrade and streamline its portfolio as Shell seeks to concentrate on its core assets in the upstream footprint.
It is expected that the acquisition of Gabon assets, which witnessed production of 41,000 barrels of oil equivalent in 2016, will help in driving output levels for Assala Energy. This will create sustainable growth opportunities and value for stakeholders.
Zacks Rank & Other Stocks to Consider
Headquartered in Netherlands, Shell is one of the largest integrated energy companies and is engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #2 (Buy).
The company outperformed the Zacks categorized Oil & Gas-International Integrated industry over the prior six months. During the aforesaid period, shares of Shell rallied almost 7% while the broader industry gained around 3%.
Other favorably placed stocks from the broader industry include Crescent Point Energy Corporation (CPG - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . Both the companies sport a Zacks Rank #1 (Strong buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Crescent Point Energy reported positive earnings surprise in each of the trailing four quarters, the average being 127.16%.
Pioneer Natural Resources is expected to deliver year-over-year growth of 1,118.2% in its earnings in 2017.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>