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Shell (RDS.A) Divests Upstream Assets in Egypt for $926M

With the completion of the deal, Shell (RDS.A) will be able to focus on offshore exploration and the integration of its value chain in Egypt, which co...

This story originally appeared on Zacks

Royal Dutch Shell plc (RDS.A) recently concluded the sale of its upstream assets in Egypt's Western Desert for $926 million to a consortium made up of subsidiaries of Cheiron Petroleum Corp. and Cairn Energy PLC CRNCY.

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The contract announced in March was set at a base price of $646 million along with additional payments of around $280 million between 2021 and 2024, depending on the price of crude oil and exploration results. The agreement comprising Shell Egypt’s interest in 13 inland concessions and its share in the Badr El-Din Petroleum Company (BAPETCO) was completed after fulfilling all government consents and pending approvals.

Shell and Egypt will benefit from the agreement. Shell will be able to focus on offshore exploration and the integration of its value chain in Egypt, which comprises seven additional blocks in the Nile Delta, West Mediterranean, and the Red Sea. Further, it will enable Egypt in realizing the full potential of its onshore assets through fresh investment, ensuring energy and revenue security for the foreseeable future.

This transaction aligns with Shell's worldwide attempt to improve its exploration and production portfolio to become more concentrated, flexible, and competitive, and to play an important part in its "Advance Progress" strategy.

Shell has been active in Egypt for 110 years and is one of the few integrated energy corporations with a presence throughout the integrated value chain. The company's position in the midstream sector is maintained through its Egyptian LNG joint venture, while its downstream presence is maintained through Shell Lubricants Egypt.

Also, recently, Shell announced an agreement to sell all its assets in the Permian, the most prolific basin in the United States, to its competitor ConocoPhillips COP. The cash transaction is valued at $9.5 billion. Upon closure, proceeds worth $7 billion from the transaction will be utilized to support additional shareholder dividends with the balance going toward debt reduction.

Shell belongs to a global group of energy and petrochemical companies. It is involved in all phases of the petroleum industry, right from exploration to final processing and delivery. The company is scheduled to release third-quarter results on Oct 28, 2021. The current Zacks Consensus Estimate for earnings is pegged at $1.39 per share for the to-be-reported quarter.

Shell has seen its shares surge 66.9% in a year’s time compared with the industry's growth of 64.6%.

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Zacks Rank & Another Stock to Consider

Shell currently carries a Zack Rank #2 (Buy). Another top-ranked player in the energy space include Canadian Natural Resources Ltd. CNQ, presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, the Zacks Consensus Estimate for Canadian Natural’s 2021 earnings has been raised 14.7%.

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ConocoPhillips (COP): Free Stock Analysis Report


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Cairn Energy PLC (CRNCY): Free Stock Analysis Report


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