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Shell (SHEL) to Receive $1.2B in Exchange for Sakhalin Stake

Shell plc SHEL is set to receive $1.2 billion from Novatek, a Russian gas company, for its 27.5% stake in the Far East Sakhalin-2 LNG project, per media reports. This move was made following a recent go-ahead given by the Russian president, Vladimir Putin.

A decree from Putin last year mandated that Sakhalin Energy Investment Co., the joint venture in charge of the Sakhalin-2 oil and gas project, transfers its rights and responsibilities to a newly established state Russian company. Sakhalin Energy Investment, whose biggest stakeholder is Gazprom, had Shell and Japan’s Mitsui and Mitsubishi as minority shareholders.

After Russia invaded Ukraine, Shell declared (in early 2022) that it would end its equity partnerships with Gazprom and related entities. These would include its 27.5% stake in the Sakhalin-2 liquefied natural gas facility, its 50% stake in the Salym Petroleum Development, and the Gydan energy venture.

Following Putin's order in July 2022, the Russia government granted one month to the three minority foreign owners in Sakhalin-2 — Shell, Mitsui & Co. and Mitsubishi — to claim their shares in the new company that would replace the existing project. While the Japan-based companies retained their stakes, Shell acknowledged that it was seeking ways to exit the project.

In an attempt to purchase Shell's share of the Sakhalin-2 project, Novatek submitted an application with the government seeking permission to make the payment to Shell and allow the latter to receive the same in an overseas account. Per media reports, Putin approved the transfer of funds in order to minimize the risks for operating activities and export of hydrocarbons from the project.

Zacks Rank & Key Picks

Currently, Shell carries a Zack Rank #3 (Hold).

Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, Par Pacific Holdings Inc. PARR, each sporting a Zacks Rank #1 (Strong Buy), and Valero Energy Corporation VLO, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CVR Energy, a diversified holding company with its main office in Sugar Land, TX, is an independent refiner and marketer of high value transportation fuels. Over the past seven days, CVI has seen an upward revision in earnings estimates for 2023.

Par Pacific, a growth-oriented company, combines knowledge of corporate financing with experience in the oil and gas sector. With 94,000 barrels per day of active refining capacity and a logistical system that includes an SPM, storage, barges, pipelines and trucking operations, PARR owns and manages one of Hawaii's biggest energy networks. Over the past 30 days, the company has witnessed upward revisions in earnings estimates for 2023 and 2024.

Valero Energy is a global manufacturer and marketer of transportation fuels and petrochemical products. With 15 refineries spread across Canada, the United States and the U.K., it has a daily refining capacity of 3.1 million barrels. Over the past seven days, VLO has seen upward revisions in earnings estimates for 2023 and 2024.

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Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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