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egoli.com: CitiWarrants: Woodside Petroleum – We Don’t Think Shell Will Sell

11/12/2007

We Don’t Consider Shell a Seller of its 34% Equity in Woodside — Shell doesn’t need cash, it wants reserves which are currently difficult to obtain through exploration. Selling or diluting its equity position in Woodside doesn’t achieve this objective; it simply creates a stronger competitor and removes its strategic LNG holding, a recognised core focus area for Shell. We maintain our Sell Medium Risk rating on WPL and target price of $46.20/share.

LNG is Material to Shell — Shell currently has the largest LNG capacity of any nongovernment company and Woodside, particularly with its project potential, will be considered an important part of the portfolio. Woodside provides Shell with Operating expertise – that it surprisingly has no direct exposure to.

Dilution Lessens Control — Shell currently has three board positions. Any equity dilution may reduce this allocation, lessening the influence it has over the company and consequently weakening Woodside’s strategic value.

Conclusion — No value proposition for Shell in diluting its LNG exposure. Shell not a seller of Woodside in our view..

http://www.egoli.com.au/egoli/egoliStoryPage.asp?PageID=%7BCA09AAE8-7C21-45AF-9CF3-7A8D32A64E94%7D&Section=Warrants

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