Shell Buys 50% Stake In Natural Gas Blocks

Royal Dutch Shell acquired an operating stake of 50% in the Fuerte Sur, COL-5 and Purple Angel blocks. From Colombia’s state-owned oil company, Ecopetrol, they are located in deep water off the Colombian Caribbean coast.

This involvement can be a great opportunity for Colombia to develop its energy potential in a safe and efficient manner. 

The company will contribute its knowledge and experience to overcome the technical challenges that the maritime operation poses.

Ecopetrol is the largest company in Colombia. It is among the 40 largest oil companies worldwide.

The deal was first announced in a statement on February 7, 2020. Shell Colombia’s President Ana Maria Duque, said that this position is a significant step in Shell’s aspirations. These were its objectives in Colombia and in South America. 

This agreement combines Ecopetrol’s regional know-how and Shell’s deep-water experience as well as ability to provide integrated gas solutions. They have collaborated with Ecopetrol on multiple occasions since its creation, she said. 

They’re very happy to continue to demonstrate their more than 84-year commitment working with Colombia and its energy resources, she added.

Shell’s shares have lost around 40% in value so far this year. Oil demand cratered and energy prices fell during the coronavirus pandemic .

Buy Rating

John Gerdes, an MKM Partners analyst, initiated a Buy rating on the stock, earlier this week.  A price target of $57 (59% upside potential) was set. He says that Shell shares could recover as the company gets leaner and focuses more on renewables.

Moreover, Gerdes believes that Shell’s investment projects like wind energy could offer 10% returns on average. At this time, he doesn’t expect Shell to recover significantly enough to return to its pre-pandemic position.

A Strong Buy based on 7 Buys and 1 Sell is a consensus among analysts. Over the next 12 months, the average price target of $44.45 implies upside potential of around 24%.