Leading integrated energy firm
Royal Dutch Shell plc
) and partner, Russia based oil firm Gazprom Neft have started
their pilot drilling program under the joint venture (JV), Salym
The JV is drilling the first horizontal appraisal well, in Upper
Salym, using multifrac technology. It is part of the five
appraisal wells that are to be drilled in 2014-15 to evaluate the
potential of the Bazhenov formation in the Salym fields.
This pilot program follows the drilling of three vertical
exploration wells by the JV over the last three years in order to
lower uncertainties in developing the Bazhenov formation. Also,
to evaluate the production potential of the formation, the JV has
tested two wells.
U.K.-based Shell is the largest oil company in Europe and has
worldwide operations. It is involved in various activities
related to oil and natural gas, chemicals, power generation,
renewable energy resources, and other energy related businesses.
Though a healthy dividend yield and reasonably cheap valuation
are positives for Shell, we are concerned about its high exposure
to the downstream business, which leaves it less diversified than
its integrated peers. As such, the group's results remain greatly
exposed to refining/marketing margins. Moreover, given natural
gas' volatile fundamentals, Shell's gas focused nature could pose
a problem. Also worth noticing is the company's lofty capital
Royal Dutch Shell currently holds a Zacks Rank #4 (Sell),
implying that it is expected to underperform the broader U.S.
equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the energy
sector such as
Linn Co, LLC
). All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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