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Shell Strikes a New Find in the Norphlet Play in GoM

Zacks Equity Research

Integrated energy behemoth, Royal Dutch Shell plc (RDS.A) announced that it has made yet another major find in the deepwaters of the Gulf of Mexico in the Norphlet play. This discovery, the third in the region, was made using the Rydberg exploration well.

The exploration well, drilled to a depth of 26,371 feet, is located 75 miles off the Louisiana coast. Though evaluation of well results is still under progress, Shell estimates resource potential of about 100 million barrels of oil equivalent (mmboe).

Shell, with its 57.2% interest, is the operator of the partnership that made the discovery. Other parties include Ecopetrol SA (EC) and a subsidiary of CNOOC Limited (CEO), Nexen. Ecopetrol has 28.5% interest in the partnership while CNOOC holds the remaining 14.3%.

Shell continues to be the leader in exploring this Jurassic-period resource play, with over 10 years of exploration success in the Eastern Gulf of Mexico. Moreover, Shell’s management believes that the Rydberg discovery would strengthen its leading position and generate value for shareholders as well.

The two other major discoveries in the Norphlet play, the Appomattox find in 2010 and Vicksburg in 2013, have an estimated resource potential of 500 mmboe and 100 mmboe respectively. These discoveries were carried out in a partnership between Shell and Nexen.

Following the Rydberg discovery, Shell and Nexen have planed to drill an exploratory well at Gettysburg. The drillship Noble Globetrotter I, which drilled the Rydberg exploration well, is being relocated for the Gettysburg well.

Shell is one of the major integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities. The company is expected to release second-quarter results on Jul 31 and has an Earnings ESP of +4.14%.  

Shell currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months. Meanwhile, one can consider better-ranked players from the integrated oil space like Statoil ASA (STO), which has a Zacks Rank #2 (Buy).

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