Shell to Fully Take Over Gasnor


Royal Dutch Shell Plc (RDS.A) inked a Share Purchase Agreement with the Norway based small-scale liquefied natural gas (LNG) supplier Gasnor AS. Shell expects to close the acquisition in the third quarter of 2012, following approvals from the Norwegian authority.

Per the deal, Shell, which already holds 4.1% of Gasnor stakes, will take over the remaining outstanding shares for a price of U.S. $74 million or NOK 455.5 million.

Gasnor is involved with the delivery of LNG to industrial and marine customers and also operates an end-to-end supply chain. The company’s assets include three small scale production plants and distribution properties along with two tanker ships, a convoy of trucks and a network of terminals.

With this acquisition, Shell will move a step ahead in shaping up an LNG sales business unit that is expected to enhance commercial customers’ fuel mix of the company.

Shell management stated that the company will be able to reap benefits from Gasnor’s experience in LNG marketing and sales. Coupled with its own customer base, Shell aims to capture the European marine market before the new environmental regulations are implemented in 2015.

These parameters, levied across the Baltic Sea, English Channel and North Sea, will impose the rules of reduced levels of harmful air emissions. The use of LNG will help minimize these emissions.

Headquartered in The Hague, Netherlands, Shell 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.

We believe Shell’s strong and diversified portfolio of global energy businesses offer attractive long-term growth opportunities. The company has also introduced a number of strategic programs, which include aggressive cost reduction initiatives, the exit from unprofitable markets and streamlining of the organization.  

However, the company remains susceptible to its exposure to oil and gas price fluctuations, lofty capital spending and international business risks. As such, we see Shell performing in line with the broader market and maintain our Neutral recommendation.

Shell, which operates in the industry with big players such as BP plc (BP) and Total SA (TOT), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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