Shell Mulling $1B Pipeline Stake Sale - Analyst Blog

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Europe's oil major Royal Dutch Shell plc ( RDS.A ) is planning to sell a stake worth about $1 billion in its Houston-to-Houma pipeline system, according to people aware of the matter.

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 drilling ventures.

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 businesses.

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 SA ( YPF ), BP plc ( BP ) and Total SA ( TOT ). YPF sports a Zacks Rank #1 (Strong Buy) while BP and Total carry a Zacks Rank #2 (Buy).



BP PLC (BP): Free Stock Analysis Report

ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report

TOTAL FINA SA (TOT): Free Stock Analysis Report

YPF SA D CV ADR (YPF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BP , RDS.A , TOT , YPF

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