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Shell Finds Gas Column Offshore Malaysia

Integrated energy behemoth, Royal Dutch Shell plc (RDS.A) announced a deep-water gas discovery off the coast of Malaysia. The well Rosmari-1 is located in Block SK318, 135 kilometers off the shore. Drilled to a depth of 2,123 meters, the well has revealed over 450 meters of gas column.

Shell is the operator of the block with an 85% interest, whereas PETRONAS Carigali Sdn Bhd holds the remaining 15%. The find, in a strategic area of interest for Shell, adds to the company’s recent exploration accomplishments in Malaysia.

Shell is one of the largest integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities. In view of the volatile outlook for the marketing and refining operations, the company has decided to streamline its downstream portfolio. Moreover, Shell is diverting capital toward exploration activities in liquids-rich shale resources and tight gas acreages that could come as a positive.

However, several factors such as weak downstream operations, lofty capital spending and high exposure to natural gas weighs heavily on the company. We remain cautious of Shell before its first quarter 2014 earnings is reported, expectedly on Apr 30. The company has missed the Zacks Consensus Estimate for earnings in three successive quarters. The trend could continue to the upcoming earnings as well as indicated by the negative revisions for the current quarter consensus estimate.

Shell currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the broader energy sector such as Helmerich & Payne, Inc. (HP), Vermilion Energy Inc. (VET) and Range Resources Corporation (RRC). All these stocks currently sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RRC
Read the Full Research Report on RDS.A
Read the Full Research Report on HP
Read the Full Research Report on VET


Zacks Investment Research