Royal Dutch Shell plc RDS.A intends to divest assets worth as high as $30 billion over a period of three years, as per Bloomberg.
According to the report, the properties that might get included in the divestment list are the company’s interest in Indian oil and gas fields, stakes in Trinidad & Tobago along with U.S pipelines that transport both oil and crude products.
Let ‘delve deeper into Shell’s intentions for such a massive asset selling program. Last month, Shell closed its merger with BG Group plc − a leading upstream energy player in the UK. Notably, with the purchase of BG Group, Shell surpassed Chevron Corporation CVX to become the second biggest private oil firm in the world. For this achievement, more than $10 billion cash was wiped out from Shell’s pocket that led Fitch Ratings Ltd to cut its credit rating. Additionally, Shell’s debt to equity ratio increased after the BG purchase. Following this, Shell is considering the massive three-year divestment plan as the proceeds will significantly strengthen its financials.
However, Shell might face difficulties in finding potential buyers as the business environment has not been in its favor for a long time following low oil and gas prices.
Shell is an integrated energy firm with a strong and diversified portfolio of development projects that offer attractive long-term opportunities. In fact, Shell’s buyout of BG Group will boost its strong and diversified portfolio of global energy businesses that offers attractive long-term growth opportunities.
However, the oil price slump has affected Royal Dutch Shell’s earnings and cash flows, in particular at its upstream unit.
As a result, Shell currently carries a Zacks Rank #3 (Hold), implying that it will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players that are worth considering include Antero Resources Corporation AR and Matador Resources Company MTDR. Both the stocks sport a Zacks Rank #2 (Buy).
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