Shell Gets Federal Nod for Prep Work

Global energy company, Royal Dutch Shell plc ( RDS.A - Analyst Report ) has received the necessary approval from federal officials to perform limited site work in the Beaufort Sea, in order to set up its second drill site off Alaska’s northern coast.

Earlier, The Bureau of Safety and Environmental Enforcement had given its nod for similar activities in the neighboring Chukchi Sea to Shell.

However, Shell cannot move ahead with its drilling plans in the petroleum zones till the spill response barge is in place. Earlier this month, the company had postponed its Arctic drilling plans for a year after a spill containment dome sustained damage during the course of a testing session.

This year, Shell will drill pilot holes and look into other well preparation work.

As per federal reports, the U.S. Arctic waters contain an estimated 26 billion barrels of oil and 130 trillion cubic feet of natural gas. Shell expects to tap this huge resource.

Royal Dutch Shell plc owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources, and other energy related businesses. Royal Dutch Shell divides its operations into three major segments: Upstream, Downstream, and Corporate.

We believe that Shell’s strong and diversified portfolio of development projects offer lucrative long-term opportunities to the company and will continue to boost revenue and earnings growth over the next few quarters.

However, the company is particularly susceptible to its high exposure to the downstream business, its major natural gas focus, as well as lofty capital spending, which may result in reduced returns going forward.

Royal Dutch Shell – Europe's most valued oil company, ahead of BP plc ( BP - Analyst Report ) and Total SA ( TOT - Analyst Report ) currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.