Back to Main

Shell to Continue Monaca Evaluation - Analyst Blog

By: Zacks.com
Posted: 12/27/2013 3:50:00 PM
Referenced Stocks: HNR;RDS.A;TESO;ZINC

Shell Chemical LP, the petrochemical arm of Europe's oil giant Royal Dutch Shell plc ( RDS.A ), has received an extension to buy the proposed site for a multibillion-dollar petrochemical plant in Beaver County from the site's owner, Horsehead Corp., an affiliate of Horsehead Holding Corp. ( ZINC ).

The Amended and Restated Option and Purchase Agreement will allow Shell to continue its evaluation process of the 300-acre Monaca location. The agreement also states that Shell would bear the cost of the demolition activities slated to start first quarter next year at the Monaca facility. Demolition of the existing zinc plant is a head start on preparing the location for the upcoming project. However, Shell has not yet committed to any final investment decision.

In Mar 2012, Shell had signed the agreement to evaluate the land for the petrochemical complex. The plant is expected to convert ethane from the liquid-enriched Marcellus Shale to produce chemicals like ethylene.

Shell has been offered lump sum tax incentives to continue with the plan. Once the petrochemical complex comes online, it will benefit all the three areas of Ohio, West Virginia and Pennsylvania.

U.K.-based Shell is the largest oil company in Europe. Moreover, 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.

However, the company's relatively heavy downstream exposure leaves it less diversified than its integrated peers. As such, the company's results remain greatly exposed to refining/marketing margins. The company's downstream operations have struggled recently from weak demand for fuel, leading to lower returns in this segment.  

Royal Dutch Shell currently holds 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.

Meanwhile, one can consider better-ranked energy players like Harvest Natural Resources Inc. ( HNR ) and Tesco Corporation ( TESO ). Both these stocks currently sport a Zacks Rank #1 (Strong Buy).



HARVEST NATURAL (HNR): Free Stock Analysis Report

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

TESCO CORP (TESO): Free Stock Analysis Report

HORSEHEAD HLDG (ZINC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research