Europe's largest oil company
Royal Dutch Shell plc
) has entered into an agreement with Swiss international energy
trading giant Vitol Group to sell its Australian downstream
assets for approximately A$2.9 billion ($2.6 billion). The
transaction - subject to regulatory approvals - is expected to
close in 2014.
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The to-be-sold properties covers the Anglo-Dutch energy major's
Geelong refinery near Melbourne and its 870 retail outlets, apart
from bulk fuels, bitumen, chemicals and a portion of Shell's
lubricants businesses in Australia. However, the scope of the
contract does not include the Aviation unit, which will remain
with The Hague, Netherlands-based group.
Despite Shell's decision to part way with its refining assets
Down Under, the company maintained that it still remains
committed to Australia and the initiative is just part of an
effort to streamline its downstream portfolio.
As a matter of fact, for quite some time now, Shell has been
looking to improve its performance and remain competitive in this
difficult environment by embarking on aggressive cost reduction
initiatives, exiting unprofitable markets and streamlining the
organization. The company's recent decision to sell its
refineries in the U.K., Germany, France, Norway and the Czech
Republic is part of that strategy.
Royal Dutch 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
Shell currently retains 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.
Some better-ranked stocks in the energy sector include
Linn Co. LLC
Warren Resources Inc.
Range Resources Corp.
). All these domestic upstream players, with a Zacks Rank #1
(Strong Buy), have seen solid secular growth and harbor the
potential to rise significantly from the current levels.