Royal Dutch Shell plc
) - through its affiliate SWEPI LP - entered into an asset
development agreement with Fort Worth, Texas-based
Quicksilver Resources Inc.
QUICKSILVER RES (KWK): Free Stock Analysis
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
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Per the terms of the joint venture signed between the two aforesaid
companies, they will be involved in developing their oil and gas
holdings spanning across the Sand Wash Basin in Northwest Colorado.
The companies are expected to cover more than 850,000 acres in the
basin and set up an Area of Mutual Interest ("AMI").
Each company will transfer 50% of its working interest in the
majority of their acreage in the Sand Wash Basin to the other
party. This will also endow each company with the right to 50%
stake in any acquisition within the AMI.
Quicksilver will also be paid an undisclosed compensatory amount
from SWEPI for its large share in acreage contribution compared to
SWEPI, subject to agreement, will likely act as the operator for
most of the property, while Quicksilver will continue operating
wells drilled prior to the agreement along with other assigned
The deal - awaiting customary rules and conditions, is expected to
be closed by the end of 2012.
The Hague-based Royal Dutch Shell owns one of the largest
integrated oil and gas businesses in the world. Shell, currently
retains a Zacks #3 Rank that translates into a short-term Hold
rating. We are also maintaining our long-term Neutral
recommendation on the stock.
We believe that Shell owns a strong and diversified portfolio of
global energy businesses that offer attractive long-term growth
opportunities. The group's strong inventory of development projects
and increased capital expenditures should facilitate volume growth
over the long haul.
However, the company is particularly susceptible to its high
exposure to the downstream business, its major natural gas focus,
as well as lofty capital spending, which may result in reduced
returns going forward.