Shell Exits Ukraine Gas Development Project

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Integrated oil major, Royal Dutch Shell plc (RDS.A) has withdrawn from an offshore gas field development project in Ukraine. In Jan 2014, Shell exited the production sharing agreement (PSA) to develop the Skifska oil and gas field, in the Black Sea, west of Crimea.

In Aug 2012, the Ukrainian government had chosen a consortium, led by Shell and ExxonMobil Corp. (XOM) to develop the gas field. The company expected the PSA to come into effect in 2012 or 2013 but no such development took place. Though Shell has left this development project, it will continue to work on other projects in Ukraine.

The Skifska field, located in the deepwater shelf of the Black Sea, is estimated to contain about 200–250 billion cubic meters (bcm) of gas. The field was expected to generate 5 bcm per year upon completion of the development phase.

Shell is one of the largest integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities. 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.

Last week, Shell announced its decision to slash capital investment this year in upstream activities in the Americas. Shell is expected to lower the spending by 20% from the amount invested in 2013, as the company has been incurring losses in the North American shale resource plays. Moreover, Shell is planning to divide its downstream portfolio into distinctive performance segments and allocate capital accordingly to maximize profits.

Shell currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the energy sector like Range Resources Corporation (RRC) and Patterson-UTI Energy Inc. (PTEN). Both the stocks sport a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on PTEN
Read the Full Research Report on RDS.A
Read the Full Research Report on XOM


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