Back to top

Shell Nears Its Divestment Target With $1.3B Worth Deal

Read MoreHide Full Article

Royal Dutch Shell plc (RDS.A - Free Report) recently inked a $556-million deal to divest stakes in two of its oil fields located offshore Norway to Norwegian producer OKEA AS. The European giant will jettison 44.56% and 12% interests in the Draugen field and Gjoa block, respectively.

Notably, Shell operated in the Draugen field that held around 24 million barrels of oil reserves as of Dec 31, 2017. On the other hand, the Gjoa field, chiefly operated by Neptune Energy, had oil and natural gas reserves of 13 million barrels and 13.5 billion cubic meters, respectively, at the end of 2017. OKEA expects production of around 22,000 barrels of oil equivalent per day from both the fields.

Meanwhile, total production from these fields accounted for 14% of Shell’s total Norwegian output in 2017. The fields netted production of 25,000 barrels of oil equivalent to Shell last year.

Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure in the fourth quarter of 2018. However, the deal does not mark the exit of Shell from oil-rich Norway, as it still holds stakes in various fields including Ormen Lange and Knarr, among others.

In a separate release, the company announced the completion of the sale of its 15% holding in Petronas-led Malaysian LNG Tiga to the Sarawak State Financial Secretary for $750 million, increasing the latter’s total interest in the project to 25%. Malaysian state-owned energy company Petronas owns 60% interest, while other co-owners Nippon Oil Finance and diversified conglomerate Mitsubishi Corporation hold 10% and 5% stakes, respectively.

These divestment deals take Shell’s $30-billion divestment program another step forward, with the company almost nearing its target. The divestment deals have provided the company a major uplift in its drive to decrease debt, following the acquisition of BG Group for $47 billion. With Shell already wrapping up divestment deals worth $27 billion and having announced further asset disposals of around $2 billion, the company remains focused to meet its target by 2018. The deal will also help the company upgrade and streamline its upstream portfolio.

Headquartered in the Netherlands, Shell is one of the largest integrated energy companies engaged in the production, refining, distribution, and marketing of oil and natural gas. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other top-ranked stocks in the same industry include Chevron Corporation (CVX - Free Report) and OMV AG (OMVJF - Free Report) , each sporting a Zacks Rank #1.  

Chevron’s 2018 earnings are expected to increase 125.14% year over year.

OMV AG's earnings for 2018 are anticipated to grow 13.01% year over year.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Chevron Corporation (CVX) - free report >>

Royal Dutch Shell PLC (RDS.A) - free report >>

OMV AG (OMVJF) - free report >>

More from Zacks Analyst Blog

You May Like