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Shell (RDS.A) to Sell Stakes in Comgas and Mukhaizna Field

Zacks

Moving ahead with its divestment goals, European oil giant Royal Dutch Shell plc RDS.A recently inked a deal with Brazilian energy conglomerate Cosan Limited to divest stakes in Companhia de Gas de São Paulo aka Comgás. Per the deal, Shell will offload its entire 16.8% stake in Comgás which is Brazil’s biggest natural gas distribution company. The vending will enable Shell garner proceeds of around $380 million in both equity and cash. Subject to satisfactory closing conditions, the deal is likely to complete by the end of the year.

The divesture will aid Shell to streamline its portfolio and focus on other high quality competitive assets in Brazil. Shell performs diversified operations in Brazil including its deepwater portfolio along with downstream businesses through Raizen Energia SA. Shell also owns minority interests in Libra, Lula, Sapinhoá, Lapa, and Iara fields, all of which are located in the pre-salt Santos Basin, off Brazil. Amendments in Brazil’s oil industry laws have paved way for viable investments in the country and the Anglo Dutch giant has been enhancing its upstream portfolio in the country. The company plans to invest in more standardized deep-water vessels over the next three years in Brazil.

Notably, Shell is also contemplating to sell a 17% stake in Mukhaizna oil field in Oman. The field which is operated by Occidental Petroleum Corporation OXY recorded a production of 127,000 barrels of oil equivalent per day in 2016. Shell expects to receive around $200 million with the sale of its stake in Mukhaizna oil field.

The divestment deals are part of Shell’s move to lower debt arising from the $50 billion mega acquisition of BG Group. It is part of its portfolio optimization strategy and the $30 billion global divestment program for 2016-2018. With Shell already closing more than $25 billion divestment deals, it remains on track to meet its target by 2018.


Zacks Rank and Key Picks

Headquartered in Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold). Shares of Shell have rallied 12.3% year to date compared with 1.4% growth of its industry.

Some better-ranked players in the energy space are Viper Energy Partners LP VNOM and Jones Energy, Inc. JONE. Both these firms sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Viper Energy reported positive earnings surprise in the last four quarters, the average being 18.36%.

Jones Energy delivered a positive earnings surprise in each of the trailing four quarters, the average being 97.80%.

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