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Shell (RDS.A) Plans to Divest Its Oil Holdings in Iraq

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Per reports recently published on Reuters, integrated energy major Royal Dutch Shell plc (RDS.A - Free Report) is considering exiting its positions in Iraqi oil fields. This sale is part of a $30 billion divestment plan of the company following the BG Group buyout. The acquisition was completed in February and was worth $54 billion.

In Iraq, Shell holds a 45% stake in Majnoon oil field. The company operates the field under a technical service contract, which will expire in 2030. It also owns a 20% interest in the West Qurna 1 field. In 2015, Iraqi assets contributed about 4.4% of Shell’s total oil and gas production.

Per sources, the Anglo-Dutch group – the world’s top liquefied natural gas producer – is divesting only its oil field assets in Iraq and not its gas field properties. This is because the company has found only limited financial benefits from its involvement in Iraq's oil production. Hence, it intends to focus on oil production in Brazil and the Gulf of Mexico, as these areas generate the highest returns. Shell, however, plans to retain the gas business because it expects those assets to generate sufficient value for it.

Shell intends to divest as much as $30 billion by exiting operations in five to 10 countries. It has, however, made relatively slow progress in this regard as the oil price rout dampened buyer enthusiasm for deals at the prices Shell is targeting. In 2016, Shell sold or agreed to sell around $6 billion of assets.

The Anglo-Dutch group’s divestment plans are targeted to weather the more than two-year downturn in oil prices and to improve its financials post the BG Group acquisition.



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.

Other well-ranked players from the broader energy sector include Braskem S.A. (BAK - Free Report) , Ultra Petroleum Corp. and McDermott International Inc. (MDR - Free Report) . 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, Braskem posted an average positive earnings surprise of 105.5%.

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

In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.

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