Hess Corporation
(
HES
) has struck an asset sale deal with
Royal Dutch Shell Plc
(
RDS.A
) related to its stake in an oilfield off the Scottish coast. The
company did not disclose the financial terms of the transaction,
which is subject to the regulatory approval.
Per the deal, Hess aims to offload its 15.67% stake in the
BP Plc
(
BP
) run Schiehallion field, a related share in the Schiehallion
floating, production, storage and offloading vessel (FPSO) and the
West of Shetland pipeline system. Located in 204 and 205 blocks,
the Schiehallion field is about 175 kilometers west of the Shetland
Islands. The sale of these non-operated, non-core properties is a
part of Hess' portfolio optimization plan that will eventually aid
the company to continue growing its production and reserves.
Hess has been the co-worker in the Schiehallion venture since
1996, and the FPSO vessel has been in service since 1998. The
construction of a new vessel is also currently underway and will
likely commence production in 2016.
Following the completion of the transaction, which is expected
to be in the latter half of 2012, the U.K. energy giant Shell will
be the largest holder of the Schiehallion project by owning a 49.1%
stake, while BP will have the operatorship interest of 36.3%.
Last quarter, the New York-based integrated energy company
registered lower-than-expected earnings mainly due to lackluster
production volume. Moreover, we believe that future asset sales
will likely hamper the company's production and bring down its
profitability levels.
Despite the recent setback in quarterly production, we remain
positive on Hess' strong exploration upside in Ghana. The company's
Paradise discovery offshore Ghana is expected to offer the needed
momentum over the coming years.
Hence, we expect the stock to perform in line with other
industry players and the broader market and maintain our Neutral
recommendation. The company retains a Zacks #3 Rank, which is
equivalent to a Hold rating for a period of one to three
months.
BP PLC (BP): Free Stock Analysis Report
HESS CORP (HES): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
Report
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