The largest oil company in Europe Royal Dutch Shell plc RDS.A is looking to streamline its portfolio of global assets in the wake of persistent low commodity prices. This time, the company is assessing its business interests in New Zealand.
To go into more details, Shell is planning to focus on operations with more prospects to partially counter the effects of the crude price slump. In other words, the company will only invest in high potential projects and divest other assets to stay afloat in such disadvantageous conditions. In fact, Shell has already announced plans of raking in as much as $50 billion from asset disposal in the 2014–2018 period.
Investors should note that the company is the largest producer of gas in New Zealand with operations in the country crossing 100 years. Also, the company has interests in the nation’s Kapuni, Pohokura and Maui oil and gas fields.
Shell is one of the largest integrated energy firms in the world with a strong and diversified portfolio of development projects that offer attractive long-term returns. The company’s decision to acquire BG Group, U.K.’s third largest energy player, is expected to improve its prospects even further. This is because Shell will be able to boost its oil and gas reserves by almost 25% and will benefit from BG Group’s big natural gas projects throughout the world.
However, with crude prices still remaining weak, Shell’s upstream division has been able to extract less value for products. This has exerted pressure on the group’s profit margins. This is already reflected in the company’s dismal third-quarter performance.
As a result of these factors, Shell carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Murphy USA Inc. MUSA, Energy Transfer Equity LP ETE and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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