Royal Dutch Shell news: On Monday, Royal Dutch Shell plc (ADR) (NYSE:RDS.A), announced that its asset at the Eagle Ford shale formation in south Texas will be sold. During last August, the company made public the intention to write down $2.1 billion in North America. Management said the 106,000 acres and 192 wells asset “does not meet our global targets for materiality and scale”. The operation means the firm will end its presence in 50-year long presence in Texas.
Shell bought the asset in 2010, influenced by prior increments on gas prices. However, by the time management closed the deal and activities begun at the site, declining prices affected expected margins. Once operations were under way, the firm made public its dissatisfaction with unmet targets for scale and profitability.
Profits were cut short for Shell, as for many of its competitors, because the US shale boom was driven by independent oil companies. Hence, Exxon Mobil Corporation (NYSE:XOM) and Chesapeake Energy Corporation (NYSE:CHK) were also hit by the surge in gas supply and declining prices. But these two, unlike Shell, were successful at extracting oil from the shale and benefit from high prices, making the stay worth the while.
On another note, Shell continues its legal rumble in India concerning a share transfer from Vodafone. The oil giant accuses Vodafone India Services Pvt Ltd of underpricing an intra-group share transfer by Rs 15,000, followed by tax evasion.
In the latest development, the Bombay high court asked the Indian units of Vodafone Group Plc (ADR) (NASDAQ:VOD) and Shell to file rejoinders by 10 October to the replies filed by the income tax department in an alleged transfer pricing case. The case will be heard on October 17th, but there is no certainty what the outcome will be.
Last, there are rumors concerning Shell’s divestiture of further assets in North America and Africa. Some of the mentioned assets are: shale prospects in Colorado and Kansas, the Chukchi sea prospects off Alaska (interests acquired at enormous cost), and onshore assets in Nigeria.
Disclosure: Jodor Jalit holds no position in any of the mentioned stocks.