Europe's oil major
Royal Dutch Shell plc
) is planning to sell a stake worth about $1 billion in its
Houston-to-Houma pipeline system, according to people aware of
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It is believed that this proposition will raise funds to meet the
costs associated with the pipeline reversal that took place in
Dec 2013. The concerned people also mentioned that Shell may
reinvest the funds generated from the sale into more profitable
Originally, the 563-kilometer Ho-Ho pipeline carried crude from
Louisiana to Texas. The reversed pipeline, which is valued at
around $3 billion, transports crude from the inland oil rich
plays in Eagle Ford and Bakken, providing cheaper crude access to
the U.S. Gulf Coast refineries. The reversal marked the
completion of the second phase of the Ho-Ho pipeline project. As
part of the third and fourth phases of the project, Shell plans
to add pumping stations to increase the capacity of the pipeline.
U.K.-based Shell is the largest oil company in Europe. The
company has operations worldwide and is involved in various
activities related to oil and natural gas, chemicals, power
generation, renewable energy resources and other energy related
Shell is expected to report its fourth quarter and full year
earnings on Jan 30. With the company missing the Zacks Consensus
Estimate in two quarters back-to-back, we remain concerned about
the upcoming results. Moreover, on Jan 17, the company announced
that it anticipates weak fourth quarter profit, substantially
lower than both the sequential and year-ago periods, due to an
increase in exploration costs, lower oil and gas output and weak
performance by the company's refining unit.
Shell currently carries a Zacks Rank #5 (Strong Sell), implying
that it is expected to significantly underperform the broader
U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the oil and
gas integrated sector like
). YPF sports a Zacks Rank #1 (Strong Buy) while BP and Total
carry a Zacks Rank #2 (Buy).