Markets
BP

Shell to Stop Arctic Drilling Like Exxon, BP and Chevron

Royal Dutch Shell plcRDS.A has finally decided to quit its Arctic drilling program for the foreseeable period of time. The decision is unfortunate as the integrated energy major has already spent as much as $7 billion on Arctic drilling over more than eight years. Following the news, Shell slipped more than 3% on NYSE.

The biggest question is what made Shell stop its operations when the Arctic area, which is still unexplored, has huge oil potential? In fact, as per the 2011 Interior Department data, the U.S. waters of Chukchi and Beaufort seas have massive 22 billion barrels of oil, that could be recoverable, along with 93 trillion cubic feet of natural gas.

Nonetheless, Shell made up its mind to walk away from the project after disappointing drilling results from the Burger J well in the Chukchi Sea. In details, Shell drilled down the well to roughly 6,800 feet with the hope of considerable petroleum content. But the company got a rude shock of insignificant oil and gas and decided to abandon the Arctic drilling program.

But has Shell taken the right decision to quit the operation after unsatisfactory outcome from just one well in the Arctic region? Shell had previously announced that its revised Arctic drilling plan has six prospective wells. However, owing to the Arctic region's huge operating expenses and excessive regulatory hurdles for environmental issues, the company does not find it feasible to carry on this operation, especially when oil price has been weak for a prolonged period.

By quitting the project, Shell joins a long queue of leading energy firms, like Exxon Mobil Corporation XOM , BP plc BP and Chevron Corporation CVX , which have already closed the Arctic program.

It was simply the unforeseeable future following plummeting oil prices that compelled Chevron to stop its Arctic exploration. A consortium of BP and Exxon, however, mentioned that it did not have enough time to start the initial drilling test prior to its lease expiration in 2020.

Shell currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BP PLC (BP): Free Stock Analysis Report

CHEVRON CORP (CVX): Free Stock Analysis Report

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

EXXON MOBIL CRP (XOM): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

BP RDS.A XOM CVX

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More