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Shell Divests NZ Assets to OMV to Simplify Upstream Portfolio

Zacks Equity Research

Royal Dutch Shell plc RDS.A recently got rid of all its properties in New Zealand, following the completion of $578-million divestment of its oil and gas assets to OMV, an Austrian integrated oil and gas company. The divestment was announced in March 2018 and received green signal from the New Zealand Commerce Commission in August. Markedly, the company operated in the country for more than a century.

About the Assets

The offloaded properties incorporate Maui and Pohokura fields, Tank Farm units, along with Shell’s stake in the Great South Basin venture. The employees working in the assets are now expected to work for OMV. With respective operating interests of 48% and 83.75%, Shell was the operator in the Maui and Pohokura fields, off the Taranaki coast, which supported 70% of New Zealand’s natural gas demand. The company had been conducting exploratory drillings in the undeveloped Great South Basin.

Divestment Rationale

The divestment is in line with the company’s move to simplify its upstream portfolio. The divestment also follows Shell’s 2016-2018 disposition targets of $30 billion that included offloading Canadian oil sands assets, as well as operations in Gabon, Australia and U.K. North Sea. Notably, on Nov 30, 2018, the company sold its upstream project in Ireland for $1.3 billion.

Price Performance

Headquartered in The Hague, Netherlands, Shell’s stock has lost 14.4% in the past year compared with 14.3% fall of the industry it belongs to.

Zacks Rank and Stocks to Consider

Shell currently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better ranked stocks as given below:

Calgary, Canada-based Gran Tierra Energy Inc. GTE is an international oil and gas exploration and production company. Its bottom line for 2018 is expected to surge more than 300% year over year. The company delivered a positive average earnings surprise of 24% in the trailing four quarters. The stock currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Shell Midstream Partners, L.P. SHLX is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 27.7% year over year. The company currently sports a Zacks Rank #1.

Obsidian Energy Ltd. OBE is a Calgary, Canada-based exploration and production company. Its bottom line for 2019 is expected to surge more than 80% year over year. The company currently has a Zacks Rank #2 (Buy).

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