Integrated energy giant, Royal Dutch Shell plc (RDS.A), plans to sell its Eagle Ford properties in south Texas, following the announcement of a $2 billion write-down of its North American assets in August. The company’s second-quarter results reported a drop in profits primarily due to the write-down.
Shell plans to sell the leases it holds across 106,000 acres in the shale play. The company will allow interested buyers to evaluate the technical information on the assets while it continues to work on the 150 producing wells. However, Shell has been unable to reap the benefits from its holding in the oil-gas-rich play. This is because Shell entered the market only in 2010 when the price of natural gas was already in a downtrend, thereby rendering the economics less profitable.
On the other hand, companies like Exxon Mobil Corporation (XOM), ConocoPhillips (COP) and Marathon Oil Corporation (MRO) have benefited significantly from their share in the play. Shell believes that its move to exit the shale play offers a good growth opportunity to other operators.
The company also plans to divest the 600,000 acres it holds in Mississippi Lime formation in Kansas with the objective of investing the proceeds in other areas.
Shell stock trades in a 52-week range of $62.65 to $73.00. Following the announcement, stocks fell marginally (0.3%), settling at $65.68 on Sep 30.
Shell owns one of the largest oil and gas businesses in the world. The group is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy related businesses. Shell divides its operations into three major segments, Upstream, Downstream and Corporate.
Royal Dutch Shell currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months. Among the other companies mentioned above, Marathon and Exxon Mobil hold a Zacks Rank #3 (Hold), whereas ConocoPhillips has a Zacks Rank #2 (Buy).
- Oil, Gas, & Consumable Fuels
- Basic Materials Industry
- Royal Dutch Shell plc