According to a recent report on Reuters, integrated oil company Royal Dutch Shell (LON:RDSa) plc RDS.A intends to sell roughly $3 billion worth stakes of Canadian Natural Resources Ltd. (TO:CNQ) in order to withdraw its focus from the oil sand business in Canada.
The decision by the company complements its strategy to divert its attention towards renewable energy. The deal has the potential of becoming one of Canada's biggest stake divestments.
Shell announced early this year its willingness to divest its properties in Canadian oil sands to Canadian Natural for total consideration of $8.5 billion. The amount comprises of 98 million Canadian Natural stocks that are presently worth around $3 billion.
The company is looking for a suitable financial adviser for the transaction. To this end, it is interviewing several investment banks.
Shell will use the proceeds from the transaction to reduce its debt burden, which was incurred during previous year’s acquisition of British oil and gas company, BG Group plc. The $54 billion buyout was a part of the company’s strategy to focus on cleaner fossil fuel. Shell sold assets worth $20 billion over the last two years for financing the transaction. Also, Shell is likely to dispose more properties valued almost $10 billion by next year.
Price Performance
Shell’s stock outperformed the Zacks categorized Oil and Gas, International Integrated industry for the last one year. While shares of the company gained 10.43%, the industry registered an increase of 4.57% during this time.
About the Company
Headquartered in The Hague, Netherlands Shell is an integrated energy company. The 3-year commodity bear market has adversely affected the company’s earnings and cash flows, particularly at its upstream unit.
On top of that, the firm’s exposure to production in the vulnerable and violence-prone regions in Nigeria poses additional risk.
As a result, Shell currently carries a Zacks Rank #5 (Strong Sell).
Stocks to Consider
Better-ranked stocks in the energy sector include Delek US Holdings, Inc. (NYSE:DK) and Enbridge Energy, L.P. (NYSE:EEP) . Both the stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Delek US Holdings’ sales for 2017 are expected to increase 74.02% year over year. The company had a positive average earnings surprise of 60.68% in the last four quarters.
Enbridge Energy’s sales for the second quarter of 2017 are expected to increase 13.17% year over year. The partnership had a positive earnings surprise of 38.22% in the last four quarters.
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Enbridge Energy, L.P. (EEP): Free Stock Analysis Report
Delek US Holdings, Inc. (DK): Free Stock Analysis Report
Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report
Royal Dutch Shell PLC (RDS.A): Free Stock Analysis Report
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