Markets

Why is Shell Planning to Offload Two North Sea Properties?

Per The Times, Royal Dutch Shell plcRDS.A intends to offload its stakes in two North Sea properties and is currently looking for prospective buyers. High expenses related to production and the constantly weak oil prices are the primary reasons behind the decision.

According to sources, the European energy behemoth is likely to sell its 50% interest in the aging Gannet oil and gas field. The other asset that the company planning to divest is the 26% stake it owns in the Triton floating production, storage and offloading vessel.

Weak oil prices have consistently affected business globally, particularly in the North Sea. Therefore, it is no longer feasible to spend an excessive amount for the aging wells in the region.

Headquartered in The Hague, Netherlands, Shell has three major segments: Upstream, Downstream, and Corporate. The company is the most gas-focused among the major companies in the sector, with more than half of its current production from the commodity. Given the volatile fundamentals of natural gas, this remains a key area of concern in our view. Moreover, with crude prices still weak, Shell's upstream division has been able to extract less value for its products. This has pressured the group's profit margins.

Additionally, we remain skeptical about Shell's $70 billion mega deal to acquire BG Group plc, which is likely to increase the company's net debt and reduce its liquidity.

The company currently carries a Zacks Rank #5 (Strong Sell), which implies that the stock will significantly underperform in the broader U.S. equity market over the next one to three months.

Some better-ranked players from the energy sector are NuStar Energy LP NS , Matrix Service Company MTRX and Exterran Partners LP EXLP . All the stocks sport a Zacks Rank #1 (Strong Buy).

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

NUSTAR ENERGY (NS): Free Stock Analysis Report

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

MATRIX SERVICE (MTRX): Free Stock Analysis Report

EXTERRAN PTNRS (EXLP): 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

NS MTRX

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