Oil Leakage at Shell's Ho-Ho Pipeline

Zacks Equity Research
March 10, 2014

Europe oil major, Royal Dutch Shell plc (RDS.A) reported the loss of roughly 364 barrels of crude oil from its Houston-to-Houma (Ho-Ho) pipeline in southeast Texas. The puncture in the pipeline was accidently caused by the working construction crew. Shell, however, stated that it is not certain about when the pipeline will be online again.

Shell declared that it shut the pipeline immediately and took adequate preventive measures. The pipeline transports crude oil from Port Neches, Texas to Houma, Louisiana at a rate of 360,000-barrel-per-day (bpd).

U.K.-based Shell is the largest oil company in Europe. Moreover, the company 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.  

Shell’s high exploration costs along with lower oil and gas output during the fourth quarter 2013 are matters of concern. Moreover, the company’s relatively high downstream exposure leaves it less diversified than its integrated peers.

As such, the group’s results are highly dependent on refining/marketing margins. Shell’s downstream operations were impacted by lower refining profits (particularly in Asia and Europe), together with weak marketing and trading contributions.

Shell currently holds a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one consider at better-ranked players in the energy sector like Range Resources Corp. (RRC), Patterson-UTI Energy Inc. (PTEN) and Helmerich & Payne Inc. (HP). All the stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RDS.A
Read the Full Research Report on RRC
Read the Full Research Report on PTEN
Read the Full Research Report on HP


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