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Shell (RDS.A) Signs New Agreement With QatarEnergy in Egypt

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·4 min read
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Royal Dutch Shell plc (RDS.A) signed farm-out agreements (FOAs) with QatarEnergy, wherein the latter will acquire interests in two Shell-operated offshore exploration blocks in Egypt’s Red Sea region.

A FOA enables an existing project partner to add new participants to the project by selling a portion of its stake in the venture.

In 2019, Shell acquired rights in Block 3, which covers about 3097 square kilometers in water depths of 100-1000 meters. Block 4, which covers about 3084 square kilometers, was also awarded to the company in the same year. Once the deal closes, Shell will continue operating with 43% and 21% working interests in Blocks 3 and 4, respectively.

Per the terms of the deal, QatarEnergy will obtain a 17% interest in each of the two Rea Sea blocks. QatarEnergy has been actively growing its global exploration portfolio through various farm-in agreements mainly focused on offshore tracts. The latest agreement marks QatarEnergy’s entry into the thriving upstream oil and gas sector of the Arab Republic of Egypt to explore the frontier acreage.

Shell could attract entrants in the market due to the promising investment conditions in Egypt. The oil giant believes that adding potential partners will enable it to leverage their joint expertise in the project.

In September, Shell downsized its business operations after divesting its onshore upstream interests in Egypt’s Western Desert area to the U.K.-based producer Cairn Energy and its Egypt-based partner Cheiron Petroleum. At that time, Shell cited that it still considered its offshore assets in the country’s Nile Delta, West Mediterranean and Red Sea areas essential.

Company Profile & Price Performance

Shell is one of the primary oil majors — a group of big energy multinationals based in the United States and Europe. The company is fully integrated, as it participates in every aspect related to energy, from oil production to refining and marketing.

Shares of the company have underperformed the industry in the past three months. The stock has gained 4.4% compared with the industry’s 10.1% growth.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank & Stocks to Consider

Shell currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy PDCE is an independent upstream operator that engages in the exploration, development and production of natural gas, crude oil and natural gas liquids. PDCE, which reached its present form following the January 2020 combination with SRC Energy, is currently the second-largest producer in the Denver-Julesburg Basin. As of 2020-end, PDC Energy’s total estimated proved reserves were 731,073 thousand barrels of oil equivalent.

In the past year, shares of PDC Energy have gained 150% compared with the industry’s growth of 88.8%. PDCE’s earnings for 2021 are expected to surge 286.7% year over year. In the past 60 days, the Zacks Consensus Estimate for PDC Energy’s 2021 earnings has been raised by 25%. PDCE beat the Zacks Consensus Estimate in the last four quarters, with an earnings surprise of 51.06%, on average.

Phillips 66 PSX is the leading player in its operations like refining, chemicals and midstream in terms of size, efficiency and strengths. PSX’s operations include processing, transportation, storing, and marketing fuels and products worldwide. Phillips 66 is currently valued at $33.9 billion and offers a quarterly dividend of 92 cents.

PSX is projected to see a year-over-year earnings surge of 532.6% in 2021. It has witnessed three upward revisions in the past 30 days. Phillips 66 beat the Zacks Consensus Estimate three times in the last four quarters and missed once. PSX currently has a Zacks Style Score of A for Value.

Callon Petroleum Company CPE solely focuses on the exploration, and production of oil and gas resources in the Permian Basin. CPE boasts an impressive footprint throughout the core of the Permian Basin, which is the highest-producing shale play in the United States. Callon Petroleum, currently valued at $2.9 billion, entered the basin in 2009 and has been strengthening its foothold in the region since then.

In the past year, shares of Callon Petroleum have gained 248.4% compared with Zacks Exploration and Production Industry’s growth of 88.8%. CPE’s earnings for 2021 are expected to surge 222.4% year over year. CPE currently has a Zacks Style Score of A for both Growth and Momentum.

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Royal Dutch Shell PLC (RDS.A) : Free Stock Analysis Report

Phillips 66 (PSX) : Free Stock Analysis Report

PDC Energy, Inc. (PDCE) : Free Stock Analysis Report

Callon Petroleum Company (CPE) : Free Stock Analysis Report

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