Shell (RDS.A) Calls Off Thailand Gas Field Divestment Deal

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European oil giant Royal Dutch Shell plc RDS.A has decided not to proceed with the $900-million deal to offload stake in an offshore Thailand Gas Field to a unit of Kuwait Petroleum Corporation. Shell had signed the deal in January.

Per the deal, KUFPEC — a subsidiary of Kuwait Foreign Petroleum Exploration Co. — was to acquire two subsidiaries of Shell. The two subsidiaries — Shell Integrated Gas Thailand Pte. Limited and Thai Energy Co Limited — own a combined 22.2% interest in the Bongkot field and the adjoining offshore acreage. Other partners in the Bongkot natural gas field include France’s Total S.A. TOT along with Thailand’s PTT Exploration and Production. These companies own 33.3% and 44.4% interests in the field respectively.

The deal was set for closure by the end of the first quarter of 2017, subject to satisfactory conditions. However, the deal was called off as Shell and Thailand’s government could not come to terms regarding matters of share sales within the stipulated time.

The divestment was part of the company’s move to lower debt arising from the $50 billion mega acquisition of BG Group. It was part of its portfolio optimization strategy and the $30 billion global divestment program for 2016-2018. However, with Shell already closing more than $25 billion divestment deals, it remains on track to meet its target by 2018.

Notably, Thailand represents a promising part of Shell’s world class portfolio. With the scrapping of the deal, the company remains keen on investing in viable exploration projects in the country.  With the Bongkot concession expiring in 2023, Shell is set to participate in the upcoming auction for the next phase of the project.

Headquartered in Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold). Shares of Shell have rallied 12% year to date compared with 0.5% growth of its industry.


Some better-ranked players in the energy space are Lonestar Resources, Ltd. LONE and Viper Energy Partners LP VNOM.  Both these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lonestar Resources is expected to achieve year-over-year growth of 60.20% and 79.67% in its sales and earnings in 2017.

Viper Energy reported positive earnings surprise in the last four quarters, the average being 18.36%.

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