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Shell and Eni Slapped with Corruption Charges in Nigeria

Zacks Equity Research

Oil giants Royal Dutch Shell RDS.A and Eni SpA E recently faced criminal charges from Nigeria’s anti-graft agency over the $1.1 billion acquisition of Africa’s richest oil blocs in 2011.

The court filing alleges that the companies paid a bribe of $801 million to the former Oil Minister of Nigeria, Dan Etete and his allies for the purchase of Oil Prospecting License (OPL) 245. The government received only $210 million from the deal. The Nigerian Court has seized the oilfield assets from the companies and ordered the transfer of oil blocs to the government.

The Inside Story

OPL 245 is considered to be one of the richest oil blocs in Nigeria comprising over nine billion barrels of crude oil. Former Nigerian President, Goodluck Jonathan had handed over OPL 245 to Malabu Oil, a company with questionable credentials secretly established by Dan Etete. Since Malabu Oil was thought to be a fraudulent company, Etete decided to cash in on the bloc.

Through various middlemen, Shell and Eni were asked to purchase the bloc. Due to Etete’s scandalous records, former Justice Minister Adoke became the mediator for the transaction.

The companies denied of being involved in the crime and claimed that the money was paid into the Nigerian government account. Various investigations however, reveal that the companies were guilty. Several senior executives of both the companies have faced a trial over these corruption allegations.

About Royal Dutch Shell

Headquartered in Netherlands, Shell is one of the largest integrated energy companies, engaged in the production, refining, distribution and marketing of oil and natural gas. The company carries a Zacks Rank #2 (Buy).

Shell has outperformed the Zacks categorized Oil & Gas-International integrated industry over the prior three months. During the aforesaid period, the company’s shares fell 0.5% while the broader industry declined around 1.5%.

About Eni SpA

Based in Rome, Italy, Eni’s major business segments are Exploration and Production (E&P), Gas and Power, and Refining and Marketing. The company presently carries a Zacks Rank #2.

Over the last three months, shares of Eni rallied 5.5% compared to the 1% drop witnessed by the Zacks categorized Oil & Gas International Integrated industry.

Other Stocks to Consider

Other favorably placed stocks in the broader industry include Semgroup Corporation SEMG and Crescent Point Energy Corporation CPG. Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Semgroup posted average positive earnings surprise of 79.10% in the last four quarters.

Crescent Point reported a positive earnings surprise in each of the trailing four quarters, the average being 127.16%.

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Royal Dutch Shell PLC (RDS.A): Free Stock Analysis Report
ENI S.p.A. (E): Free Stock Analysis Report
Semgroup Corporation (SEMG): Free Stock Analysis Report
Crescent Point Energy Corporation (CPG): Free Stock Analysis Report
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