Anglo Dutch oil giant Royal Dutch Shell PLC RDS.A recently announced that its subsidiary, Shell Offshore Inc. is heading toward a final investment decision to develop the Kaikias project in Gulf of Mexico. The project is a joint venture undertaken by Shell and MOEX North America, a subsidiary of Tokyo-based Mitsui Oil Exploration Co. Shell holds 80% operating interest in the project, while the remaining 20% stake is held by MOEX North America.
Kaikias, located in the Mars-Ursa basin is estimated to hold more than 100 million barrels of oil equivalent. It is likely to be a competitive and economically attractive project for Shell. The company has managed to mitigate the overall costs by half due to the existing oil and gas processing equipment on Ursa, reuse of developed appraisal wells and Kaikias’ simplified design. The total cost of the project has not been disclosed; however Shell expects to break even at oil prices lower than $40 per barrel.
The project is set to develop in two phases with phase one likely to commence production from 2019. The first phase of development includes designing of three wells which are expected to produce up to 40,000 barrels of oil equivalent per day.
Shell intends to grow its deep water production from the current 725,000 barrels of oil and gas per day to more than 900,000 by 2020. It is also developing two more projects, Coulomb Phase 2 and Appomattox, in Gulf of Mexico.
Zacks Rank and Key Picks
Headquartered in Netherlands, Shell is one of the largest integrated energy companies and is engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #2 (Buy).
The company outperformed the Zacks categorized Oil & Gas-International integrated industry over the prior six months. During the aforesaid period, shares of Shell rallied almost 4.6% while the broader industry gained around 3%.
Some favorably placed players in the industry include Repsol SA REPYY, Crescent Point Energy Corporation CPG and Denbury Resources Inc. DNR. All the three companies sport a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Repsol SA posted average positive earnings surprise of 46.34% in the last four quarters.
Crescent Point Energy Corporation reported positive earnings surprise in all the four trailing quarters, the average being 127.16%.
Denbury Resources Inc. is expected to generate year-over-year growth of 21.66% and 418.75% in its revenues and earnings respectively in 2017.
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