Sep 30, 2013, 1:50pm CDT
As Shell sells off even more major shale assets, what could be next?
Royal Dutch Shell Plc (NYSE: RDS) is selling off numerous shale assets.
Reporter-Houston Business Journal
Royal Dutch Shell Plc’s (NYSE: RDS) trio of recent shale asset sales raises the question of what could be next in the U.S. for the supermajor.
The company, which just announced it’s selling its stake of 106,000 acres in the Eagle Ford Shale in South Texas, told the Wall Street Journal the assets weren’t meeting the company’s profit targets.
It’s a similar point that’s been made in recent weeks as Shell has announced other plans to divest assets in Colorado and Kansas.
The Hague-based Shell’s U.S. subsidiary, Shell Oil Co., is headquartered in Houston.
Stephen Simko, an analyst with Morningstar Inc. in Chicago, noted that after overspending in the sector, Shell has planned to dial back its presence in the shales.
“Shell overall has been very unsuccessful with its major investments into North American shale,” he said.
The company has spent about $30 billion in U.S. and Canadian shale plays, and short of a major rebound in natural gas prices, some of its exploration and production returns will be hurting, according to a Morningstar research note in August.
“Production targets seem unlikely to be met given that North American shale gas is no longer economic to develop,” Morningstar said. “Shell made a big bet there, and for now, this appears to be a bust.”
As for any profit from the divestitures, Simko said Shell could net a few billion dollars from the sales in South Texas and Kansas.
Still, in other sectors, Shell is thriving. Last week, the company revealed its selection of a site on the Gulf Coast for a proposed multibillion-dollar project — a $12.5 billion investment, at minimum — for a natural gas-to-liquids facility.
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Deon Daugherty covers energy and law for the Houston Business Journal. Read the top Texas energy news in our free weekly newsletter, Energy Inc. Subscribe to the Energy Inc. newsletter. For her breaking stories, follow her on Twitter.