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Shell's Canada Unit Closes 24 Wells Due to Alberta Wildfire

Zacks Equity Research

The Canadian unit of integrated oil and gas company, Royal Dutch Shell plc RDS.A was recently forced to halt part of its gas operations in its Waterton complex in southern Alberta due to uncontrolled wildfire that erupted nearby.

Current Situation

The company had to shut down operations at 24 natural gas wells and associated pipelines on a precautionary basis. The evacuation process is on as workers were withdrawn from the facility, except those who are engaged in performing critical services. The company is monitoring the fire closely. Immediate evacuation plan for the employees who have stayed put is in place.

The wildfire also poses a threat to Shell's Yarrow Canyon facility located 2.5 kilometers away. The fire raged through Waterton Lakes National Park due to strong winds. Firefighters in the area are working to bring the wildfire under control.

About Waterton Project  

Along with multiple natural gas wells, the Waterton complex has a sour gas processing plant. Production capacity from the project is around 179 million cubic feet per day. Apart from sour gas, the company produces methane, liquid natural gas, condensate and sulfur from the Waterton assets. The facility is located south-west of Pincher Creek. The facility has fire-resistant large gravel pads around it, which can reduce the amount of damage if the fire reaches the facility.

About the Company

Headquartered in The Hague, Netherlands, Shell explores for and extracts crude oil, natural gas, and natural gas liquids. The company transports oil and gas, converts natural gas to liquids to produce and market fuels and other products. It also extracts bitumen from mined oil sands and turns it into synthetic crude oil. Shell also generates electricity from the wind. The company divides its operations into four major segments: Upstream, Downstream, Corporate and Integrated Gas.

In terms of assets, Shell owns a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. The group’s strong inventory of development projects should help volume growth in the long run.

Shell’s revenues, earnings and cash flow have been significantly hurt by the three-year commodity bear market, while attacks on its local establishments by Nigerian militants have created another major problem.

Price Performance

Shell’s stock has gained 5.9% year to date against 2.2% fall of the industry it belongs to.

Zacks Rank and Stocks to Consider

Shell carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Lonestar Resources US Inc. LONE, Range Resources Corporation RRC and Subsea 7 SA SUBCY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lonestar Resources’ sales for 2017 are expected to surge 60.2% year over year. The company delivered a positive earnings surprise of 62.5% in the second quarter of 2017.

Range Resources’ sales for the third quarter of 2017 are expected to increase 27% year over year. The company delivered an average positive earnings surprise of 51.8% in the last four quarters.

Subsea’s sales for 2017 are expected to increase 11.6% year over year. The company delivered an average positive earnings surprise of 83.8% in the last four quarters.

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