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Shell Sells Nigeria Lease Stake

Zacks Equity Research

Royal Dutch Shell plc (RDS.A) recently announced that its subsidiary – The Shell Petroleum Development Company of Nigeria Limited (:SPDC) – has completed the divestiture of its 30% stake in Oil Mining Lease 30 (OML30) in the Niger Delta.

The interest was sold to local joint venture company Shoreline Natural Resources Limited for $567 million.

OML30 includes Kokori, Afiesere, Oweh, Olomore, Eriemu, Evwreni, Oroni and Isioka fields and extends over an area of about 1097 square kilometers. The fields that were divested produced 35,000 barrels per day of oil and include a crude oil pipeline from OML30 to the Forcados River.

This divestiture is in tandem with SPDC’s onshore portfolio restructuring initiative. It also serves to meet the Federal Government of Nigeria’ target to expand the presence of Nigerian companies in the country's upstream oil and gas business.

Total E&P Nigeria Limited – a subsidiary of Total SA (TOT) and Nigerian Agip Oil Company Limited will also give their respective 10% & 5% interest in the lease to Shoreline.

Shell has been conducting operations in Nigeria for more than 50 years and is engaged in the production of oil and gas with SPDC and other local companies there, thereby accelerating economic growth.

Royal Dutch Shell plc owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources, and other energy related businesses. Royal Dutch Shell divides its operations into three major segments: Upstream, Downstream, and Corporate.

We believe that Shell’s strong and diversified portfolio of development projects offer lucrative long-term opportunities to the company and will continue to boost revenue and earnings growth over the next few quarters.

However, the company is particularly susceptible to its high exposure to the downstream business, its major natural gas focus, as well as lofty capital spending, which may result in reduced returns going forward.

We are maintaining our long-term Neutral recommendation on the stock.

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