U.S. Markets close in 5 hrs 57 mins

Shell (RDS.A) Brings New Alpha Olefins Unit in Geismar Online

Zacks Equity Research

Royal Dutch Shell plc RDS.A recently finished construction and commenced production from its fourth alpha olefins unit at the company’s chemical facility located in Geismar, LA. This expansion added annual production capacity of 425,000 metric tons to the Geismar site. With this development, the total alpha olefin production capacity at the facility is ramped up to more than 1.3 million metric tons per annum, making it the largest alpha olefins producing site.

Construction started at the site in 2016 and operations began in December 2018. The alpha olefins unit is part of Shell’s key growth projects for global chemicals business. The demand for chemicals is expected to remain high for a long term as these are used in many daily-use products like hand soap, laundry detergents, lubricants, motor oils and others.

Downstream Integration

Coming online of the new unit at the site is in line with the company’s intention to integrate downstream business. Notably, Shell owns manufacturing sites — which will supply ethylene feedstock to the Geismar plant — in Norco, LA, and Deer Park, TX. It had to sell much of its U.S. ethylene production, which can now be used in the new alpha olefins unit.  With global demand for polyethylene products on the rise, the integration will enable the company to largely benefit.

Also, the company’s new plastic chemicals complex, which is currently under construction in Pennsylvania, will require alpha olefins. Production from the Geismar plant may also support the company’s Pennsylvania complex, once the latter comes online.

The commencement of production from the Geismar alpha olefins unit has set a landmark for Shell’s chemicals business, which annually sells more than 18 million metric tons of petrochemicals.

Price Performance

Headquartered in The Hague, Netherlands, Shell’s stock has lost 12.4% in the past year compared with 9.2% fall of the industry it belongs to.

 

 

Zacks Rank and Stocks to Consider

Shell currently carries a Zacks Rank #4 (Sell). Investors interested in the energy sector can opt for some better ranked stocks as given below:

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 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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 average positive earnings surprise of 24% in the trailing four quarters. The stock currently has a Zacks Rank #2 (Buy).

Bellatrix Exploration Ltd. BXE is a Calgary, Canada-based exploration and production company. Its bottom line for 2019 is expected to surge more than 30% year over year. The company currently has a Zacks Rank #2.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.