For Immediate Release
Chicago, IL – October 1, 2010 – Zacks.com Analyst Blog features: Royal Dutch Shell Plc (RDS.A), Total SA (TOT), YRC Worldwide Inc. (YRCW), Ameren Corporation (AEE) and CSX Corporation (CSX ).
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Here are highlights from Thursday’s Analyst Blog:
Shell Makes Brazilian Oil Find
Royal Dutch Shell Plc (RDS.A) informed Brazil’s oil and gas regulator about the discovery of a new offshore oil site in the country’s Santos Basin. Having been drilled to a total depth of 1.25 mile (2 kilometers) below the ocean surface, the well (located in the deep-sea pre-salt concession block BM-S-54) showed indications of hydrocarbons.
The block is situated approximately 125 miles (200 kilometers) off the coast of Rio de Janeiro state. Shell, through its Brazilian unit, has an 80% operating interest in the prospect, the other partner being French oil major Total SA (TOT). The Anglo-Dutch supermajor said that it would continue drilling to 3.7 miles (6 kilometers), following which the company will carry out an analysis of the flow and seismic data from the well.
Brazil has huge pre-salt reservoirs (oil deposits located in the sea bed under thick layers of salt) that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water. These reserves, estimated to hold upwards of 50 billion barrels, are widely thought to be the most important oil find in recent years.
We believe that the BM-S-54 discovery, if rendered economically feasible, will strengthen Shell’s position in Brazil and contribute to its mid-to-long term reserve growth. The Hague-based group is one of the few foreign oil majors producing crude offshore Brazil.
Royal Dutch Shell, which currently retains a Zacks #2 Rank (short-term ‘Buy’ rating), owns one of the largest integrated oil and gas businesses in the world. The group has operations all over the world and is involved in various activities related to oil and natural gas, chemicals, power generation, renewable energy resources and other energy-related businesses.
YRCW’s Agreement with Teamsters
Trucking company YRC Worldwide Inc. (YRCW) has reached a tentative agreement with the International Brotherhood of Teamsters. This agreement would help the struggling company save $350 million a year through March 2015 and improve its competitive position. The company is expecting that all these processes will be completed by late October 2010.
The tentative agreement would extend by two years, 2013 to 2015 and provide a further 15 percent wage reduction, benefit and work rule changes. Under this agreement, the temporary cessation of the payment of pension contributions to the multi-employer pension funds would continue until June 1, 2011, and during that time, YRC Worldwide will contribute 25 percent of the contribution rate in effect on July 1, 2009.
This agreement also gives certain power to Teamsters, such as Teamsters will have the right to approve certain changes of control at YRC Worldwide and in the event of bankruptcy, Teamsters can void the wage, benefit and work rule concessions.
YRC Worldwide is facing delisting as it has been trading below $1 dollar, which is much below the market standard. Hence, the company plans to implement a reverse stock split, at a ratio of 1-to-25, to fulfill the criteria to remain on the NASDAQ exchange.
Earlier in August, YRC Worldwide completed the divestment of the majority of its YRC Logistics division to the private equity firm Austin Ventures. Gross proceeds from the deal were $38.7 million. Out of this, YRC Worldwide received the initial proceeds of $33.6 million in cash. Divestment of the Logistics unit is part of management’s strategy to improve the company’s sagging liquidity condition.
Ameren Going Green
Ameren Corporation’s (AEE) merchant generation subsidiary – Ameren Energy Resources Company, LLC has signed a cooperative agreement with the U.S. Department of Energy (DOE) to repower an oil-fired unit located at its Meredosia Power Plant near Jacksonville, Illinois. This would transform the unit as the world’s first, full-scale, oxy-combustion coal-fired plant designed for permanent carbon dioxide (CO2) capture and storage.
The project is part of the initiative known as FutureGen 2.0, which calls for transporting the captured CO2 over a new regional pipeline to a new, deep saline injection storage facility to be developed by others in Illinois. It is estimated that FutureGen 2.0 could eventually bring as many as 900 jobs to central Illinois.
As part of this new initiative, the Department of Energy will partner with the FutureGen Industrial Alliance, Inc, to select an Illinois host community for the carbon storage site as well as a geological sequestration research complex and a craft labor training center.
The FutureGen Industrial Alliance is a non-profit consortium of some of the largest coal producers and users in the world, formed to partner with the U.S. Department of Energy on the FutureGen project. The Department of Energy has signed final cooperative agreements with the FutureGen Industrial Alliance and Ameren Energy Resources that formally commit $1 billion in Recovery Act funding to build FutureGen 2.0.
Reining in greenhouse gas emissions is critical for Ameren. The company has a marked dependence on coal for generating electricity. Ameren produced 83% of its electricity in fiscal 2009 from coal-fired facilities. This dependence on coal requires significant capital expenditure, such as installing scrubbers to comply with environmental standards set by federal agencies. Management estimates that it would have to shell out approximately $1.6 billion – $1.9 billion in the period 2010 – 2017 for complying with federal and state clean air standards.
CSX Hikes Quarterly Dividend Rate
CSX Corporation’s (CSX ) board of directors approved an 8.0% hike in the company’s quarterly dividend rate. The revised quarterly rate now stands at 26 cents per common share compared with 24 cents previously, resulting in an annual rate of $1.04 per common share. The revised dividend will be paid on December 15, to shareholders as of the close of business on November 30.
CSX Corporation follows a consistent policy of returning cash to shareholders via dividend payments and share repurchases. For the last three years, the company paid dividends totaling $884 million. The recent enhancement is the company’s eighth dividend increase in the past five years.
During the first six months of fiscal year 2010, the company paid roughly $184 million in dividends and repurchased shares worth $823 million. Cash and cash equivalents at the end of the period was $633 million and net cash from operating activities was around $1,422 million.
CSX Corporation is one of the nation’s leading transportation suppliers. The company provides rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers through its subsidiaries CSX Transportation Inc. and CSX Intermodal Inc.
The company posted encouraging second quarter results with net earnings per share of $1.07 surpassing the Zacks Consensus Estimate by 10 cents. Top-line results were also solid with an increase of 22% year over year due to volume gains across all major markets.
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