Shell to Offload Syrian Unit Stake - Analyst Blog

Energy major Royal Dutch Shell Plc. (RDS.A) has agreed to sell 35% interest in its Syrian oil and gas unit to China National Petroleum Corporation (also known as CNPC), a state-owned entity. As per the 20-year deal, estimated to be worth around $1.5 billion, CNPC will buy stake in Shell’s 100% owned unit, the Syria Shell Petroleum Development, or SSPD.

The Syrian unit has interests in three production licenses (Deir-Ez-Zor, Fourth Annex, and Ash Sham) that are operated by Al Furat Petroleum Co., or AFPC, with Shell holding a 31.25% share. Last year, Shell received 23,000 barrels of oil equivalent per day as a share of production from the licenses. CNPC is already involved in the production licenses and in AFPC by way of its 50% ownership of Himalaya Energy Syria BV.

Shell’s CNPC deal further strengthens the company’s ties with China and follows its recent joint takeover bid with PetroChina (PTR), a subsidiary of CNPC, for the Australian gas producer Arrow Energy Ltd. and a joint gas exploration and production deal in Qatar. The SSPD transaction will allow the companies to continue to invest in attractive opportunities in Syria’s upstream industry.

Royal Dutch Shell is currently rated as Zacks Rank #3 (Hold), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our Neutral recommendation, which implies that Shell shares are expected to perform in line with the overall U.S. equity market over the next six to twelve months. Therefore, we advise investors to retain the stock over this time period.