On Mar 13, 2014, Europe's largest oil company,
Royal Dutch Shell plc
) revealed its decision to slash its capital investment this year
in upstream activities in the Americas. Shell is expected to
lower the spending by 20% from the amount invested in 2013, as
the company has been incurring losses in the North American shale
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In an attempt to rebalance its portfolio, Shell is diverting
capital toward exploration activities in liquids-rich shale
resources and tight gas acreages. The company adopted this
strategy to strengthen its financial position and earn
considerable cash flow for the shareholders in the years to come.
Moreover, Shell is planning to divide its downstream portfolio
into distinctive performance segments and allocate capital
accordingly to maximize profits. Downstream portfolio comprises
operations related to chemicals, lubricants, biofuels, refining
and fuels marketing. While Shell's chemical, lubricant and
biofuel businesses are generating significant profits, its
refining and fuel marketing operations are not faring well.
Shell is one of the largest integrated energy firms in the world
with a large and diversified portfolio of development projects
that offer attractive long-term opportunities. However, Shell's
relatively heavy downstream exposure leaves it less diversified
than its integrated peers.
Shell currently retains a Zacks Rank #3 (Hold), implying that it
is expected to perform in line with the broader U.S. equity
market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy
Warren Resources Inc.
Helmerich & Payne Inc.
Patterson-UTI Energy Inc.
). All the stocks sport a Zacks Rank #1 (Strong Buy).